Fed's Rate Cut "Rashomon": A Well-Orchestrated Expectation Management

The Federal Reserve has cut interest rates! As soon as the news broke, Wall Street traders instantly boiled over. However, this seemingly market-demanding rate cut drama is filled with "surprises" everywhere, just like a suspenseful Rashomon, where everyone sees a part of the truth, yet no one can see the whole picture of the event.

"Dovish" rate cut? Powell played a "smoke and mirrors" trick

50 basis points! Powell's "generosity" surprised the analysts who had previously predicted a 25 basis point cut. However, just as the market was reveling in the joy of a "dove" rate cut, Powell suddenly changed his tone and launched a "hawkish" speech.

He emphasized that this rate cut does not mean the start of a new round of easing cycles, and the Federal Reserve will make decisions "meeting by meeting" based on economic data.

This "dovish rate cut + dovish dot plot + hawkish speech" operation, like a combination punch, caught the market off guard. Gold prices surged and then quickly fell, and U.S. stocks and bonds also fell, with market sentiment rollercoastering like a roller coaster.

The mystery of the "dot plot": disagreement within the Federal Reserve?

What's more intriguing is that this Federal Reserve meeting also staged a "dot plot" mystery. Although the median of the "dot plot" shows that there will be two more rate cuts this year, each by 25 basis points, the forecasts of nine officials contradict this, implying that there may only be one more rate cut this year.

Did Powell persuade these officials with his strong personal charm? Or is it the anonymous mechanism of the "dot plot" vote that gives officials the opportunity to express their true thoughts? This mystery may only be answered by insiders within the Federal Reserve."Preventive" Rate Cut: Powell's Precautionary Measure?

For this rate cut, Powell's official explanation is a "preventive" rate cut, aimed at addressing the risks brought about by trade frictions and a slowdown in the global economy. However, looking at the current economic data in the United States, the job market remains strong, and inflation is at a moderate level, which does not seem to support such a substantial rate cut.

Therefore, some analysts believe that Powell's move is more like taking precautions, preparing in advance for potential economic downturn risks in the future. After all, in the current context of global economic uncertainty, maintaining policy flexibility is crucial.

A Carefully Planned Expectation Management

Looking back at this Federal Reserve rate cut, it is less a simple monetary policy adjustment and more a carefully planned expectation management.

Powell understands market psychology well, using a "combination punch" approach to both soothe market sentiment and avoid over-stimulating the economy, leaving ample room for future policy adjustments.

However, whether this "expectation management" game can ultimately win still depends on the performance of future economic data.

As one Wall Street analyst said: "Powell has won this round, but the game is far from over."