Matrixport Research: The U.S. enters a monetary easing policy channel, and market volatility may further increase

On September 19 at 2:00 AM, the Federal Reserve announced a 50 basis point rate cut, lowering the target range for the federal funds rate from 5.25% - 5.50% to 4.75% - 5.00%, officially starting a period of monetary policy easing in the United States. This is the first rate cut since March 2020, and the market generally believes that the start of the rate cut cycle is favorable for risk assets. Following the announcement, crypto assets led by BTC, gold, and U.S. stocks all experienced varying degrees of gains.

The Federal Reserve is expected to cut rates by another 50 bp this year, and concerns about economic recession remain

The Fed's dot plot indicates that it expects to cut rates two more times this year for a total of 50 bp, with four cuts totaling 100 bp in 2025, and two cuts totaling 50 bp in 2026, bringing the overall rate cut to 250 bp, with a terminal rate of 2.75 - 3%. This rate cut exceeds the expectations of many Wall Street investment banks. Historical data shows that a first rate cut of 50 bp has only occurred in times of market emergencies, such as the tech bubble in January 2001, the financial crisis in September 2007, and the COVID-19 pandemic in March 2020.

Adjustments in macro data expectations, the Fed's confidence in curbing inflation strengthens

Public information shows that the Fed has lowered its GDP growth forecast for this year from 2.1% to 2.0%, and significantly raised its unemployment rate forecast from 4.0% to 4.4%. It has also lowered its PCE inflation forecast from 2.6% to 2.3%. The Fed's adjustments in data expectations indicate a strengthened confidence in curbing inflation, while the labor market remains a key focus for the Fed. Overall, the significant first rate cut and relatively hawkish pace of rate cuts have provided a short-term boost to the market.

The market's reaction to the Fed's rate cut shows a polarization of views; it remains uncertain whether there will be a soft landing for the economy or if inflation and geopolitical risks will be amplified. However, in the short term, market volatility and uncertainty are expected to increase, and market trends will likely become more complex. Investors are advised to closely monitor leading economic indicators such as employment data and to manage risks.

Disclaimer: The market carries risks, and investment should be approached with caution. This article does not constitute investment advice. Trading in digital assets may involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided in this content.