Bao Wei is cold to Milan's debut "risk management style rate cut" triggering short debt frenzy long debt collapse Dot matrix predicts three-year rate cut road.

The Federal Reserve cut interest rates by 25 basis points on Wednesday as scheduled, bringing its benchmark rate down to a target range of 4%-4.25%, the lowest level in nearly three years. In addition, the Federal Open Market Committee (FOMC) provided signals for the future policy path. Here are the five key points from this meeting and Chairman Powell's press conference: Although the rate cut was unsurprising, the market was curious about the members' future expectations in the "dot plot". The results showed that there will be two more rate cuts this year, another in 2026, and one in 2027, all leading to fund rates dropping to around 3%, which the committee's median forecast considers as "neutral". The market was confused. The Dow Jones Industrial Average initially weakened slightly, but the blue-chip index closed up 260 points. However, the S&P 500 and Nasdaq indices both closed down. In the bond market, short-term yields fell while long-term yields rose, which might be a potential issue the Fed is trying to avoid in the face of stagflation. Some of the confusion may stem from Powell characterizing this rate cut as a "risk management" operation. Additionally, although the FOMC hinted at more aggressive rate cuts this year (with actions in the remaining two meetings in October and December), they are only forecasting one rate cut each year for the next two years, with no cuts in 2028. This dovish and hawkish mix has made the market uneasy. The meeting started with strong political implications, as newly appointed board member Stephen Milan attended for the first time after being sworn in on Tuesday. However, Powell showed little sign of tension. "The only way any voter truly changes the situation is with incredibly persuasive evidence, and in the context in which we work, the only way to do that is to based on data and understanding of the economy. Thats what really matters and how it operates," the chairman stated. Although Milan was the only member to vote against the rate cut (supporting a larger half-point cut), the dot plot shows significant divergence among officials' views, highlighting the challenges in the future policy path. Officials hoping for only one more rate cut this year were narrowly defeated by those hoping for two cuts. Future forecasts also show a wide range of potential outcomes. Market Comments Dan North, Chief Economist at Euler Hermes North America, commented on the lone dissenting vote, "Perhaps they were feeling a little bit of solidarity, thinking 'new guy Milan, his agenda is pretty clear. Let's stick together and make sure he understands where we stand, and that we're all committed to the same goal.'" Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, spoke about potential successors to the Fed Chair, "We believe that in the coming years, the Fed's primary challenge in achieving its dual mandate of full employment and price stability will actually be full employment. We are witnessing once again an economy that is running well, with companies operating very healthily, but the employment environment for the people is significantly deteriorating. Therefore, we believe this will be a new challenge that the Fed will need to help address in the coming months, quarters, and years." Joseph Brusuelas, Chief Economist at RSM US LLP, said, "With turnover at the Fed expected next year, we urge caution in all predictions and strongly believe that the Fed is moving towards tolerating inflation far above its target."