ChainCatcher News: China Merchants Macroeconomics commented on the Fed’s interest rate cut: Overall, there are three signals:
1) The Federal Reserve believes that the impact of the epidemic on employment and inflation has ended;
2) The era of forward guidance has come to an end temporarily. The Fed is reluctant to reveal all its policy cards. The sharp rate cut of 50BP is to prevent sharp fluctuations in US stocks and US bonds, which have already taken this expectation into account. Powell continues to take a wait-and-see approach in order to prevent a reversal of the yen carry trade similar to the reversal in the yen carry trade in early August due to concerns about a hard landing of the US economy.
3) In addition, the Fed also wants to prevent the collapse of the siphon effect of US stocks and the large-scale outflow of funds from the US capital market due to a sharp interest rate cut. Furthermore, until the US economic data completely deteriorates, even if the Fed cuts interest rates sharply, it may not be able to significantly boost all non-US assets. However, it can be expected that the US dollar index is unlikely to strengthen for the time being, which can still ease the pressure of depreciation of non-US currencies. (Jinshi)
