Powell emphasizes that the significant rate cut is to stabilize the job market, and the US economy remains strong

According to the financial news app Zhitong Finance, on Thursday, the Federal Reserve officially began a rate-cutting cycle, announcing a 50 basis point cut in the federal funds rate, and expecting more easing policies to be introduced by 2024. The Fed stated in its quarterly economic forecast that it expects further rate cuts in 2025 and 2026.

Following this rate cut, Fed officials forecast a target range for the federal funds rate at the end of 2024 to be between 4.25% and 4.5%, down from the previous range of 5.25% to 5.5%. According to the Fed's "dot plot" forecast, the target range by the end of 2025 may further decrease to 3.25% to 3.5%.

Fed Chair Jerome Powell emphasized during a press conference that the main purpose of this rate cut is to stabilize the job market. He stressed, "We are confident in the current monetary policy adjustment, believing that this appropriate readjustment will help maintain a strong job market, achieve moderate economic growth, and bring inflation back to a stable 2%."

The Fed's rate cut decision was supported by the majority of officials, but Fed Governor Michelle Bowman voted against it, advocating for only a 25 basis point cut. Powell stated that despite differing opinions, committee members have a broad consensus on the rate cut issue, with all 19 members predicting multiple rate cuts by the end of the year.

Powell also emphasized during the press conference that the rate cut does not imply an increased expectation of an economic recession. He pointed out, "There are currently no signs indicating an increased risk of recession. Our policy adjustment is mainly for recalibration to adapt to the current economic conditions."

Regarding the housing market, Powell acknowledged that housing prices remain a stubborn factor in inflation, despite prices in other areas beginning to decline. He stated that while the slowdown in rent growth will take time, in the long term, housing price inflation will gradually cool down.

When asked whether this rate cut would be seen as politically motivated, Powell firmly denied it. He emphasized that the Fed's decisions are not influenced by political factors, but solely focus on serving the economic interests of the American people.

In conclusion, Powell stated that the Fed's policy will be adjusted based on the future economic developments, whether to accelerate, slow down, or pause easing policies, will depend on the economic conditions. He mentioned that the future path of rate cuts will depend on changes in the labor market and inflation, but currently, the U.S. economy remains strong.

This rate cut marks a new phase in the Fed's efforts to balance between curbing inflation and maintaining employment. With changes in economic data, more policy adjustments will follow.

Lindsay Rosner, Managing Director of multiple investment departments at Goldman Sachs Asset Management, stated: "The Fed delivered what the market wanted. The market is satisfied with the Fed. The market is still ahead of the Fed, expecting a further 75 basis point cut this year (the Fed's dot plot shows 50 basis points)."

Renowned economist Mohamed El-Erian stated that during the press conference, Fed Chair Powell had to deal with the contradiction between the unusual move of starting a rate cut cycle with a 50 basis point cut and repeatedly assessing the "good economic conditions" raised by journalists. This has become more tricky, and it is understandable that he does not want to admit that today's 50 basis point rate cut is an "addition" to the lack of rate cut in July "The Federal Reserve megaphone" Nick Timiraos's latest article points out that the Federal Reserve is currently trying to prevent past rate hikes from further weakening the U.S. labor market. Powell stated at a press conference, "We are committed to maintaining our economic strength. This decision reflects our growing confidence that by appropriately adjusting our policy stance, we can maintain the strong momentum in the labor market." While some Fed officials have argued in recent weeks that the economy is not weak enough to warrant a 50 basis point rate cut, others have concluded that the cooling of the labor market this summer provides a reason for further rate cuts, as the Fed is essentially making up for lost time