The U.S. Federal Reserve announced on 17th that it will lower the federal fund interest rate target range by 25 basis points.This is the first rate reduction in 2025 and again after three rate reductions in 2024.

Why did the Fed choose this time to cut interest rates?

Federal Reserve Chair Jerome Powell said:

The weakness of the U.S. job market is the top consideration right now. According to the latest data released by the U.S. government department, the number of non-farm payrolls in the United States increased by only 22,000 in August, a sharp drop from the revised 79,000 in July, and far lower than market expectations.

Meanwhile, the U.S. Consumer Price Index (CPI) rose by 2.9 percent in August, the biggest increase since January.

What is the future path of interest rate cuts by the Fed?

19 Fed officials on the forecasted future path show that the differences inside the Fed are gradually growing.

Six officials said there was no need for further interest rate cuts, while nine officials supported two more cuts, and there was a clear divide, hoping for a further 125 basis points this year, many marketers speculated that this could be the newly joined Federal Reserve (Fed) executive Milan.

What is the impact of the Federal Reserve's interest rate adjustment on the world?

For a long time, the Federal Reserve has used the hegemonic system of the US dollar to continuously harvest wealth and pass on crises all over the world through the so-called "dollar tide" formed by cutting and raising interest rates according to the needs of American interests.

Below is the timeline of the Fed¡¯s recent interest rate adjustment.

In 2020, in response to the epidemic shock, the U.S. Federal Reserve radically lowered interest rates, continuously reduced the interest rate range to close to zero from March of that year, and began to implement the so-called "no upper limit" quantitative easing, conducted an unprecedented currency "big discharge", and U.S. inflation was rapidly pushed up.

In June 2022, the U.S. Consumer Price Index increased by 9.1 percent and inflation rate reached a new high since 1980. In response to severe inflation, the Federal Reserve raised interest rates 11 times in a row from March 2022 to July 2023, with a cumulative rate hike of 525 basis points,ining the federal fund interest rate target range at a high level between 5.25 percent and 5.5 percent, the highest level since 2001.

In September 2024, the Federal Reserve announced a 50-base point reduction, lowering the federal fund interest rate target range from 4.75% to 5%, the first since March 2020.

Two rate cuts were made in October and December 2024.

When the United States cuts interest rates on a large scale, it exports capital by over-issuing US dollars to invest in other countries; When interest rates are raised aggressively, global capital will continue to flow back to the United States, supporting the US dollar exchange rate to remain strong. This poses a severe challenge to many emerging markets and developing economies, and many emerging markets and developing economies have thus fallen into the double dilemma of "more difficult financing and more expensive debt repayment".

How does the Fed cut interest rates by 25 basis points affect the market?

The Fed cut interest rates this time, the financial markets have expected, which has also led to a significant decline in the attractiveness of the dollar and the dollar assets in recent years, and the international gold price is even high.

After the Federal Reserve announced the rate cuts, U.S. science and technology stocks fell, China¡¯s Nasdaq gold index rose 2.85 percent, MSCI China index rose 2.38 percent, all of which reached new highs since December 2021.Many investment analyses have shown that the Federal Reserve¡¯s easing policy tends to push international capital flow to emerging markets and profitable stock markets. Morgan Stanley noted that the weak dollar and the falling cost of funds play a role in securing emerging markets.

Analysts also believe that more and more countries, especially emerging economies, consider reducing holdings of dollar assets and increasing holdings of gold due to development, security and other factors, which also pushes up the price of gold.

95% of central banks expect global gold holdings to increase over the next 12 months, up from 81% in 2024, without a central bank expectation of decline.

Experts remind that before the news of the interest rate cut was released, the market had relatively sufficient expectations for the Fed to cut interest rates, soGold prices have risen significantly in recent timesConsumer purchases should also comprehensively consider various factors that may affect the price of gold.Do what you can and don't follow the trend of hype.