"All the past is but a prologue."
At the early morning of September 19th Beijing time, the Federal Reserve's interest rate decision meeting announced a cut in the benchmark interest rate by 50 basis points to 4.75%-5.00%.
This is the first rate cut since the start of the rate hike cycle in 2022, indicating that the Fed is reassessing its monetary policy path.
With substantial progress in inflation, the focus of the Fed's dual mandate has gradually shifted towards the labor market.
Powell expressed confidence in the inflation rate returning to the target level in a sustainable manner and emphasized that he does not want the labor market to cool down further, signaling that the time for a shift in policy path has arrived.
Despite Powell's emphasis on the robust operation of the U.S. economy, the cumulative effects of long-term high interest rates have begun to emerge.
The dot plot shows that the median of the federal funds rate at the end of the year will be adjusted to the range of 4.25%~4.50%, and for the longer-term monetary policy, the Fed has not clearly revealed the future rate cut path.
As the Fed's rate cut presses the "hot start button" of the global market, the benchmark environment in which international financial markets operate will undergo systemic changes, deeply affecting global capital flows and asset pricing factors.
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The focus of major asset allocation may shift, which deserves the attention of global entities and financial investors, adapting to the changing economic environment.
The focus of the Fed's dual mandate has shifted towards the labor market.
At this interest rate decision meeting, the Fed announced a cut in the benchmark interest rate by 50 basis points.
Before the statement of the interest rate decision meeting, the market had fully anticipated that the Fed would start the rate cut channel in September, and the general divergence lies in the specific pace of the Fed's rate cuts.
As of September 17th, according to the CME FedWatch Tool data, the expected probability of a 25 basis point rate cut in September was 31.0%, and the expected probability of a 50 basis point rate cut was 69.0%.
Looking at the current economic data, on the one hand, inflation control has made substantial progress.
The year-on-year growth rate of PCE in July was flat compared to the previous month, the three-month annualized growth rate of core PCE fell to the lowest point of the year, and the year-on-year growth rate of CPI in August fell by 0.4% compared to the previous month, with inflation levels continuing to decline.
On the other hand, the labor market is cooling down rapidly.
The non-farm employment data in July fell sharply, and the trend of the labor market slowing down was further confirmed in the non-farm employment data in August.
At the same time, the U.S. Department of Labor revised down the non-farm data from April 2023 to March 2024 by about 820,000 people, and the labor market may have slowed down earlier than known.
Powell expressed satisfaction with the Fed's progress in controlling inflation, and the confidence in the Fed's policy shift has been strengthened, emphasizing that he does not want the labor market to continue to cool down.
In fact, looking at the experience of the past two decades, the situation where the Fed cuts rates by 50 basis points for the first time often occurs when the economy is subject to obvious external shocks.
However, influenced by the supply-side shocks since the pandemic and the subsequent large-scale fiscal and monetary policy support, many economic relationships before the pandemic have undergone quantitative changes and have been proven to be poor policy guidance after the pandemic.
Moreover, unexpectedly loose monetary policy often has a good stimulating effect on the economy.
Recently, several Fed officials, including Waller and Williams, have expressed an open attitude towards a larger rate cut.
The Fed's choice to cut rates by 50 basis points instead of 25 basis points this time shows that, supported by the current economic data, the Fed has adopted a more flexible pace of rate cuts to better protect the labor market.
The U.S. economy has not issued a red light, but the cloud of recession is still lingering.
The divergence of U.S. economic data since July has once again aroused market concerns.
Whether it is the Sam rule, the inversion of the yield curve, or the Bank of Japan's rate hike, the warning logic lies in the weakening economic environment behind it and the financial systemic risk brought about by the drying up of liquidity.
Recently, several Fed officials have emphasized that the U.S. economy has not fallen into a recession, and U.S. Treasury Secretary Yellen also said that the recent cooling of the labor market is a signal of a soft landing rather than a recession signal, and there is no "red light flashing" in the financial system.
Despite Powell's repeated statements in this press conference that the U.S. economy is operating robustly, the cumulative effects of long-term high interest rates have begun to emerge.
In this economic forecast summary, the Fed lowered the U.S. economic growth forecast for the whole year by 0.1 percentage points to 2%, reflecting that the U.S. economy is weaker than previously expected and will slow down in the second half of the year.
First, the tightening of financing constraints has been transmitted to the real estate market.
Since March, the credit support for small and medium-sized enterprises in the United States has begun to slow down marginally.
Looking at the rotation of the U.S. economic cycle, the signal of the slowdown or recession of the U.S. economy first comes from the financing constraints of commercial and industrial credit, especially the tightening of credit for small and medium-sized enterprises, and further affects the degree of credit constraints in the real estate market, and ultimately affects the residents.
Looking at the second-quarter economic data, private investment has shown signs of weakness, and residential investment has had a negative impact on economic growth for the first time.
It is expected that private investment will continue to be under pressure in the second half of the year, dragging down economic growth.
Second, the restriction of corporate financing has exacerbated the degree of labor market weakness.
Data since July shows that the U.S. unemployment rate has reached the range of 4.2% to 4.3%, and it is highly likely to continue to rise to about 4.4% by the end of the year (an average level of 4.0-4.1% for the whole year).
Within the "concave range" of the Phillips curve, the marginal decline in inflation slows down or even shows a phased rebound phenomenon, and the degree of labor market weakness is exacerbated under high interest rates.
Finally, personal disposable expenditure and retail sales growth have declined.
Although the second-quarter economic data shows that U.S. residents' consumption is still resilient, recent retail sales data has fluctuated slightly, but considering the tightening of fiscal policy and the further consumption of excess savings, the growth rate of disposable income in the residential sector has declined, and it is expected that the growth rate of retail consumption will slow down.
Taking action under uncertainty.
Although the interest rate decision meeting announced a rate cut as expected, the Fed did not clearly reveal the future rate cut path.
In this statement, Powell emphasized that future policy adjustments will be based on further changes in economic data.
In fact, the risks faced by the current U.S. economy are two-way.
On the one hand, the slowdown of the labor market has intensified, and under the continuation of high interest rate policies, the economy faces the risk of a sharp decline.
On the other hand, the intensified slowdown of employment can only be exchanged for a slow decline in inflation.
If inflation is proven to be more stubborn, or due to the resumption of tariff increases and geopolitical uncertainties, the Fed may have to pause the rate cut.
A slower rate cut can give the Fed enough time to gradually assess whether the neutral interest rate has indeed risen, but it may act too slowly and endanger the labor market.
A faster reduction in policy interest rates helps to alleviate the economic situation under long-term high interest rate policies, and the possibility of helping the U.S. economy achieve a soft landing is greater, but if the neutral interest rate has actually risen above the pre-pandemic level, it may lead to an excessive rate cut, bringing financial system instability.
The dot plot shows that the median of the federal funds rate at the end of the year will be adjusted to the range of 4.25%~4.50%, and most officials expect 1-2 rate cuts in 2024.
However, there is still some divergence among officials for the longer-term monetary policy.
Some members advocate accelerating the pace of rate cuts to support economic growth, while others worry that a rapid rate cut may trigger instability in the financial system.
As Powell mentioned earlier at the Jackson Hole conference, the direction of the Fed's monetary policy is clear, and the timing and speed of the rate cut will depend on future data, the changing outlook, and the balance of risks.
Looking at the current data path, it is expected that the Fed will cut rates by about 100 basis points within the year.
The rate cut has reset the operating environment of the financial market, and the focus of major asset allocation has shifted.
As the Fed's rate cut presses the "hot start button" of the global market, the performance of global stock, bond, foreign exchange, and commodity markets will be closely adjusted and changed around the characteristics of global capital flows.
The rotation of major assets will accelerate, and it will have a systemic impact on the structural differences in the recovery of the global economy.
Unlike the rate cut expectation, the landing of the rate cut will substantively reset the benchmark environment in which international financial markets operate, and key variables such as interest rates, exchange rates, risk appetite, and valuation centers will have a profound linkage reaction, affecting global capital flows and the pricing mechanism of asset prices.
Specifically, the interest rate cut directly affects the cost of capital, improves corporate financing conditions, increases investment, and stimulates consumption.
At the same time, as a regulator of capital flows, the direction of the dollar will undergo substantial changes after the implementation of the Fed's rate cut policy, further affecting the balance of international trade.
In addition, investor risk appetite will rise with the reduction of capital costs, driving the prices of risk assets such as the stock market and emerging market assets to rise.
And the valuation center will rise again in the low-interest-rate environment, and the reconfiguration of high valuation to low valuation markets will become the mainstream.
For enterprises in the real economy and participants in the financial market, their business strategies and investment decisions need to change with the times.
At present, global capital flows show a trend of "stock structuralization and incremental high volatility."
On the one hand, stock structuralization.
In the face of unclear economic prospects and geopolitical expectations, global stock capital has begun to show a tendency to avoid risks.
Long-term investors continue to transfer their funds to the dollar, Treasury bonds, gold, and leading companies in the stock market.
On the other hand, incremental high volatility.
The frequency of global funds flowing into and out of different markets in the short term may increase significantly.
This also reflects that investors are defining more markets as speculative markets, and more speculative behaviors will further increase the uncertainty of the financial market.
As the Fed starts the rate cut cycle, the focus of major asset allocation may shift, especially in emerging markets, driven by the narrowing of the U.S. dollar interest rate spread, the correction of the valuation center, and the return of risk appetite, new opportunities are expected to arise.当然可以，请提供您需要翻译的内容。