This analysis summarizes the Federal Reserve's recent decision to cut interest rates and its market impact, focusing mainly on the following points:

1. Interest rate cut of 25 basis points:

The Federal Reserve has lowered the target range for the federal funds rate to 3.5% to 3.75%, in line with market expectations. Nevertheless, this rate is still significantly distant from the target of below 2% proposed by Trump, indicating that the Federal Reserve may not make substantial rate cuts in the short term.

2. Market expectations and the dovish signals from the dot plot:

Dovish dot plot: The dot plot did not show the 'hawkish' signals that the market was concerned about (such as no rate cuts in 2026), but instead raised the economic growth expectations for 2026-2027 and lowered the inflation expectations, maintaining the expectation of one rate cut per year, indicating that the Federal Reserve's future accommodative policies will continue for some time.

This dovish signal has comforted the market, as it sees that the Federal Reserve will adopt relatively loose monetary policies in the coming years, especially in the context of slowing economic growth.

3. Powell's dovish comments:

At the press conference, Powell clearly stated that the risks of deterioration in the job market are more important than the upside risks of inflation, significantly downplaying the threat of inflationary pressures.

This shift reflects the Federal Reserve's greater inclination to focus on issues in the job market, especially against the backdrop of weak employment data, which may lead to further stimulus measures.

4. Technical balance sheet expansion (RMP):

Starting from December 12, the Federal Reserve will initiate technical balance sheet expansion, which means that the Federal Reserve will resume asset purchases, with an initial purchase amount of $40 billion per month. The scale and timing of this measure slightly exceed market expectations, showing the Federal Reserve's concern for the current economic situation.

Summary:

The Federal Reserve's interest rate cut is in line with market expectations, but both the dot plot and Powell's comments appear more dovish, giving the market confidence in future accommodative policies. Particularly the emphasis on employment risks may mean that the Federal Reserve will maintain low interest rates for a longer period.

The initiation of technical balance sheet expansion is also a loose signal to the market, and it is expected that the Federal Reserve will maintain a loose monetary policy stance for some time.