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On September 17, local time (early morning of September 18, Beijing time), the Federal Reserve announced its first interest rate cut since December 2024-a 25 basis point cut.
Only one day after taking office, Stephen Miran, the governor of the "airborne" Federal Reserve, voted against it, urging a radical interest rate cut of 50 basis points. He is still the chairman of the White House Council of Economic Advisers, representing US President Trump's position of sharp interest rate cuts.
Between employment and inflation, the Federal Reserve’s “double mission” is facing challenges.The statement of the Interest Conference releases a clear signal that the policy focus has shifted from “repressing inflation” to “boosting employment”.
Chief economist Song Shinto told Daily Economic News (hereinafter referred to as Daily News) that the decision to reduce interest rates in September was a two-faceted mirror of politics and economics, with 25 base points seeming a little bit, and 50 base points too much.
According to the Barclays research team, the U.S. unemployment rate will rise slightly and the risk of falling jobs will increase, and the Federal Open Market Commission (FOMC) will reduce interest rates by twenty-five basis points in October and December, and by twenty-five basis points in March and June 2026, respectively.
Transfer of focus.
Switching from “repressing inflation” to “boosting employment”
At the September interest rate meeting, which attracted much attention from the market, the latest policy statement of the Federal Reserve revealed a clear signal: concerns about the slowdown in employment have increased significantly.
The statement deleted the statement that "the labor market situation is still stable" in July, and admitted that "employment growth has slowed down, the unemployment rate has increased slightly but remains low" and "downside risks in employment have increased". This subtle change in wording confirms that the Fed's policy focus has shifted from "curbing inflation" to "boosting employment."
The Fed point chart shows that the central bank officials expect an average of 0.5 percentage points to drop interest rates by the end of the year, which means that decision-makers tend to drop interest rates by 25 basis points each on the remainder of the two interest rate meetings this year, bringing the end-of-year interest rate range down to around 3.5% to 3.75%.
Simon Dungor, head of fixed-income macro-strategy at Goldman Sachs, said: “At present, most FOMC members aim to cut interest rates twice this year, indicating that the pigeons in the committee now dominate.”
The Fed’s explanation for this is that the rate of inflation decline may not be as much as expected.The latest economic forecast shows that the Fed officials have raised their personal consumption spending (PCE) inflation forecast for 2026 to 2.6 percent, and the core PCE has also synchronized to 2.6 percent, which means that the process of achieving the Fed’s 2% target may be longer than imagined.
At the press conference, Federal Reserve Chairman Jerome Powell elaborated on the considerations behind the rate cut. He pointed out that there is a delicate balance challenge between the "dual mission" of stabilizing prices and full employment.
On the one hand, although the inflation rate in the United States has dropped from a high level, the core inflation is still around 3%, which is significantly higher than the target of 2%; On the other hand, various indicators of the job market are sending cooling signals, with labor demand and job vacancies falling, and the unemployment rate rising slightly from a multi-year low.
Powell noted in particular that artificial intelligence (AI) may be one of the factors in the slowdown in the labor market.
《每日经济新闻》此前报道，今年7月美国失业人数自2021年4月以来首次超过了空缺职位数量。而人力资源机构Challenger，Gray & Christmas的数据显示，仅今年前7个月，美国就有超1万个岗位的消失与生成式AI直接挂钩。硅谷资深人力资源专家Tom Zhang博士指出，裁员并非企业经营不善的“断臂求生”，而是一场旨在为股东创造更高价值的主动战略收缩。
Song Cheng-tao told reporters that, in terms of labor data, there seems not to be much controversy about the resumption of the Fed's interest rate cuts cycle.
He explained that the U.S. repaired half of the non-agricultural new employment in March 2024-2025. If this data is pushed out linearly, the U.S. has experienced negative growth in non-agricultural new employment in the last four months. At the same time, the jump in unemployment has also begun to arouse greater concern, these are the reasons why the U.S. Federal Reserve can cut rates by 25 basis points, the September interest rate reduction has strong rationality from the perspective of employment, the market has clearly priced for it. But if the interest rate is reduced by 50 basis points, the market will undoubtedly continue to pricing the loss of Federal Reserve independence. The September interest rate reduction decision is a double-face mirror of political economy, 25 basis points are a bit less and 50
Ma Tianping, a special researcher at the Financial Security Center of PBC School of Finance, Tsinghua University, told every reporter that the biggest problem in the United States now is that the absolute value of interest rates is too high. Compared with the level of about 0.25% in the early years, the interest rate has now reached 10 times or even close to 20 times, which directly leads to a sharp rise in the pressure to pay interest on U.S. Treasury bonds, and the government's pressure on the Federal Reserve has increased accordingly. Promoting interest rate cuts has become an important policy appeal. From this perspective, when the Federal Reserve enters the channel of interest rate cuts, there should not be many people who oppose it.
Surprisingly, the point chart shows that the Fed expects to cut interest rates only once in 2026, far more conservative than the market currently expects.
But the Barclays research team pointed out to every reporter’s forecast that future interest rate cuts would be more radical if unemployment rates jumped suddenly and exceeded the forecast.
The game behind.
"Trump spokesperson" casts the only negative vote
U.S. private equity giant Apollo Global Management had previously expected that three Federal Reserve governors would vote for a 50 basis point interest rate cut. But to the market's surprise, only the new director Stephen Miran advocated a 50 basis point interest rate cut at this interest rate meeting.
Milan’s identity is special. He was not urgently confirmed as the Federal Reserve Chairman until September 15 local time and sworn in on September 16 local time. Prior to this, he served as chairman of the Economic Advisory Committee of the Trump administration. He claimed that his work at the White House would be “stopped” until the term of office ended next January. This also made him the first Federal Reserve Chairman to serve at the White House since 1935.
During a Senate hearing, Milan said Trump chose him “probably because my political views recognize him.”
He not only served as a senior adviser to the Treasury Department during Trump’s first term, but was also appointed chairman of the White House Economic Advisory Committee after Trump’s return to the White House, becoming the president’s chief economic think tank.
Asked about the Federal Reserve’s independence, Powell said Washington is a political hub, but the Federal Reserve is an exception, “Our culture is deeply rooted in working on the data we receive and never considering anything else.”
However, there are huge differences within the Fed regarding the forecast of interest rate cuts in 2026. Two officials expect interest rate cuts to be as high as four times, three officials expect interest rate cuts to be cut three times next year, and others expect one rate cut.
Sima Shah, chief global strategist at Principal Asset Management, said, "Next year's'dot plot 'is a mixture of different perspectives that accurately reflect the confusing economic outlook, compounded by changes in labor supply, data measurement issues, and government policy turmoil and uncertainty."
Former Dallas Federal Reserve Governor Robert Kaplan said a new era is coming, “We may have to get used to the future with more objections.”
Song said to reporters, "The appearance of two councillors voting against the interest rate meeting in July has been very rare, but this is actually a 'preventive needle' for the meeting. Powell has less than a year to resign as Chairman of the Federal Reserve, I think the market is gradually recognizing greater macro-environmental changes, that is, the entire monetary policy framework of the Federal Reserve after the Jackson Hall meeting shifted to the 'duffy' tendency.
Wall Street "songs empty" beauty, gold continues to be seen well
Just before the Fed's "boots" landed, the market once fell into the speculation of "cutting interest rates by 50 basis points".
At the eve of the meeting, there was an unexpected event of a massive reduction of interest rates of 50 basis points by a “mystery trader” bet, but Forvis (a professional service company) chief economist George Lagaris pointed out that a smooth reduction of interest rates of 50 basis points could “horrify the financial markets” and send a false signal that the economic situation was “very severe” and triggered unnecessary panic.
This interest rate cut of 25 basis points is in line with mainstream market expectations. After the announcement of the Federal Reserve's interest rate cut decision, U.S. stocks rose in the short term, the U.S. dollar plunged, and spot gold rose above $3,700 per ounce.
But after Powell spoke, the U.S. stock returned to the previous rise, the dollar index rose again and gold fell. By the closing day, the Dow Jones index rose 0.57%, the S&P 500 index fell 0.10%, the Nasdaq 100 index also fell, and the dollar index rose.
For the follow-up trend of the market, the market attitude is different.
Ed Yardeni, president of Yardeni Research (a market research agency), issued a “bubble” warning, saying that injecting extra relaxation into an economy that is not weak could trigger a speculative rise away from the basics and ultimately lead to sharp adjustments.
JPMorgan strategist Mislav Matejka also stood in the "empty" queue. He said that although U.S. stocks have previously hit multiple record highs in defiance of weakness indicators, this trend may reverse once the Fed cuts interest rates. "Once easing is restarted, stocks are likely to become more cautious and will account for more downside risks," he wrote in the note.
Morgan Stanley gave a warning of "exhausting the benefits". They expect that the stock market may face short-term profit-taking pressure as the rate cut has been fully priced in by the market. "The market has previously pushed stock indexes to new highs with only a modest 25 basis point rate cut, and stocks may fall slightly."
Stuart Keizer, chief of stock trading strategies at CBS, pointed to weak employment data, saying the weak employment report in August was a “negative growth signal” that “is stronger than the benefits brought by interest rates.” He warned that if employment continues to slow and unemployment continues to rise, the impact on the stock market will be greater than the short-term boost brought by easing monetary policy.
Ma Tianping told every reporter that the U.S. economy is currently in a slightly weak state. Although the stock market has not fallen into weakness, the previous rapid rise has slowed down significantly. Cutting interest rates at this time helps boost stock market confidence. The Federal Reserve has gradually entered the channel of continuous interest rate cuts, rather than a one-time 50-point interest rate cut, which does not constitute the exhaustion of benefits. A one-time sharp drop may make the market worry about the deterioration of economic fundamentals, while a slow interest rate cut will keep the market in expectation of "policy easing continuation".
For the two major assets of the US dollar and gold, analysts expressed unanimous expectations: interest rate cuts will keep the US dollar under pressure, while the allocation value of gold will continue to be optimistic.
Carl Shamotta, chief market strategist at Corpay (a commercial payment company), said, “The dollar trading tone is heavy. People think Powell and his colleagues have mitigated inflation risk and are clearly inclined to support the labor market. This may lay the foundation for a series of interest rate cuts in the coming months. Traders are all preparing for a fall in the dollar.”
Against the background of the weak US dollar, gold has become the "sweet cake" of market hedging and asset allocation. Peter Grant (personal name), vice president and senior metals strategist at Zaner Metals (a precious metals trading company), said, "Gold has a lot of room to rise, with short-to medium-term targets around $3,600/oz to $3,800/oz. By the end of the first quarter of next year, gold prices may even reach $4,000/oz."
Ma Tianping also believes that gold has strong allocation value: on the one hand, the weakening of the US dollar supports the price of gold denominated in US dollars; On the other hand, there is a certain bubble in the U.S. stock market, while the demand for U.S. bonds is under pressure due to factors such as the difficulty of fundamentally alleviating inflation, changes in international relations, and the reduction of U.S. bond positions by some central banks. Market safe-haven demand and asset allocation adjustments are driving gold to strengthen.
From historical data, we can also see the effects of the Fed's interest rate cuts on the market.
From 1980 to 2020, the U.S. has experienced a total of nine cycles of interest rate cuts in history.Of these nine rounds of interest rate cuts, the U.S. stock has experienced four times, respectively, the U.S. stock has experienced the "black Monday" in October 1987, the Internet bubble broke in 2001, the sub-credit crisis in 2007 and the new corona epidemic in 2020.
When the Fed enters the interest rate cuts cycle, the dollar often faces downward pressure. In the nine-round rate cuts cycle in history, the dollar has fallen six times. For example, the U.S. economy did not experience a recession during the rate cuts cycle, which began in 1984, but the decline in the dollar was most noticeable, falling by 27.3%. Following that round in 1989, the dollar fell by 22.1%.
The trend of gold is obviously opposite to that of the US dollar. It has risen six times in the nine rounds of interest rate cut cycles. Among them, in the two rounds of interest rate cut cycles started in 2001 and 2007, gold performed particularly well, rising by 28.4% and 16.6% respectively.
The Fed's interest rate cuts, far more than a simple interest rate adjustment, whether it is the Federal Reserve's challenge of independence, or Wall Street's fierce debate around the "bubble" and "benefit exhaust", each fluctuation of market sentiment may be amplified, and the rise of hedge assets such as gold, may be predicting a new global asset allocation tide.