Yesterday's interest rate cut meeting was not just as simple as lowering the benchmark interest rate by 25 basis points
There are many underlying games involved
In summary, it is👇
Trump is dissatisfied with the intensity of the rate cuts. Although Powell announced the rate cut yesterday, the internal divisions within the team are becoming more pronounced
The most important thing is that it reveals a market signal👇
Internal divisions have intensified, leading to increased uncertainty in the future easing path
The short-term market sentiment is stable, but medium-term risks are rising❗️
1⃣ Core of the meeting
This is the Federal Reserve's third consecutive rate cut of 25bp, with a total reduction of 75bp,
But two dangerous signals have appeared
One is that internal opinions have shown the most serious disagreement since 2019
(I will explain the reasons for the disagreement in my next post)
This usually indicates a decline in the authority of the chairperson, and the credibility of the previously relied upon interest rate cut path has also decreased, meaning that some policies introduced by the government have also lost credibility
Currently, the main points of disagreement are the intensifying contradiction between stagnant inflation vs declining employment.
Generally, when the Federal Reserve has internal divisions, it is usually during times of significant economic uncertainty
The second is the dot plot, this time the dot plot provided is much more hawkish than previously expected
Originally it was expected that there would be multiple interest rate cuts next year, but now it is indicated that cuts will be slower and less frequent
2⃣ Changes in Powell's speech
This speech does not have the hints of continued interest rate cuts like before, it is more neutral
It neither caused panic in the market nor gave hope to the market
One particular viewpoint expressed is that the current interest rates are already in a neutral range
In other words, the interest rate cuts over 26 years will not be the previous trend of expansive easing
Instead, each time it will be driven by the data from the previous month, and each meeting may have changes
Just the other day, I researched the path of interest rate cuts, and what he means is
The changes in the interest rate of the previous path might have shown a long-term stable trend, but for a while ahead, it might not be smooth
It may remain at a certain level unchanged, or fluctuate up and down, in any case, it will not be as stable and smooth as before
3⃣ Change of chairperson
Trump has always been dissatisfied with the pace of interest rate cuts, believing they are too slow
However, according to the American system, it is very difficult for the president to directly command the Federal Reserve to cut interest rates, they can only complain about it
Then he publicly stated he wants to expedite the selection of the new Federal Reserve chairman
Currently, the most favored candidate is Kevin Warsh
Then Powell's term will end in May 26, which means he can still oversee three interest rate meetings
4⃣ Market impact
So although the short-term market will rise due to the realization of interest rate cuts
In the coming months, especially before the new Federal Reserve chairman takes office
The medium to long-term changes in interest rates are unclear, which is unfavorable for the medium to long-term trend of BTC
The originally planned few months of volatile market conditions may need to be extended
In the coming months, we not only need to consider Powell's attitude towards interest rate cuts but also the personnel changes
After all, decisions made by the person in charge cannot be considered final until the last moment
