EB SECURITIES: How will the Fed's path of interest rate cuts unfold?

EB Securities released a research report stating that the Federal Reserve's interest rate decision meeting in September will likely see a 50 basis point cut, and further emphasize the importance of achieving full employment. However, Powell's hawkish stance on future rate cuts has dampened optimistic sentiment in the stock market, indicating that the Fed does not want to prematurely release optimistic expectations in the market to avoid triggering inflation rebound. Looking ahead, it is expected that the November and December FOMC meetings are more likely to shift towards a single 25 basis point rate cut. The uncertainty of the rate cut path for 2025 and beyond remains significant, depending on the outcome of the presidential and congressional elections. Additionally, factors such as the warming trend in the real estate market and the reshoring of manufacturing in the United States may also bring about disruption. Event: On September 18th Eastern Time, the Federal Reserve held the FOMC meeting for September, lowering the federal funds rate target range to 4.75%-5.00%. The next FOMC meeting is scheduled for November 7, 2024. Key Points: The September interest rate decision meeting can be summarized as the beginning of dovish rate cuts and the hawkish Powell. The 50 basis point rate cut in this meeting exceeded market expectations slightly, but Powell's hawkish remarks dampened market optimism for a subsequent 50 basis point rate cut, leading to a decline in the three major U.S. stock indexes and an increase in U.S. bond yields. Looking ahead, considering the resilient recent consumer data in the United States, there is a risk of rebounding inflation in the fourth quarter, and with the U.S. presidential election ending before the November FOMC meeting, it is expected that the November and December FOMC meetings are more likely to shift towards a single 25 basis point rate cut. The rate cut path for 2025 depends on various factors such as the presidential election (deciding on tariffs, immigration policies), congressional elections (determining the debt ceiling and whether a new round of fiscal stimulus can be passed at the beginning of 2025), the warming trend in the real estate market during the rate decline period, etc., creating a high level of uncertainty. Market Reaction: As of the closing on September 18th Eastern Time, the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq Composite Index fell by 0.2%, 0.3%, and 0.3% respectively. The yield on the 10-year U.S. Treasury bond rose by 5 basis points to 3.70%, the 2-year U.S. Treasury bond yield increased by 2 basis points to 3.61%, and the U.S. dollar index closed at 100.9.