On the other hand, the Fed may also take action because of concerns about an impending recession. This ambiguous attitude worries the market, which has become accustomed to the Fed's cautious attitude, but this time, the Fed may be forced to make a more aggressive decision.
Analysts believe that a rapid rate cut could have an immediate impact on risky assets, especially stocks, which are the main pillar of U.S. household wealth.
If a 50 basis point rate cut is considered, it could lead to increased stock market volatility as investors would view it as a sign that the U.S. economy is in deep trouble.
Uncertainty also hangs over the job market, which has become a new focus after inflation long dominated the economic debate.
These figures are ambiguous and difficult to interpret, particularly due to the diversity of sources and the impact of immigration on the labour market.
Observers believe that the increase in labor supply could slow the pace of interest rate cuts because it makes the Federal Reserve less urgent to take aggressive action.
However, there are also critical voices that say the Fed's actions are too late. They believe that the Fed is playing a losing game and that the 50 basis point rate cut in September is just a remedial measure rather than a real long-term strategy.
Despite these uncertainties, there is no doubt that the September meeting will be a major turning point for the Fed. A big rate cut could damage its credibility and be seen as an admission that it has failed to manage inflation and a slowing economy.
Conversely, a more modest cut could be interpreted as a prudent move aimed at calming tensions without causing panic.
What is worth noting is the political dimension of this decision. With the presidential election approaching, any radical move is likely to be opposed by the stock market and policymakers.
That’s why some experts have advocated for more measured rate cuts over several months, which would allow the Fed to retain some flexibility while giving markets confidence in its ability to navigate uncertain times.
In summary, the Fed is at a crossroads between caution and action. The next meeting on September 18 is expected to provide key indicators about the health of the US economy and the Fed's ability to adapt to an increasingly uncertain economic environment.
Meanwhile, as investors hang on central banks’ every word and action, trying to decipher signals from central banks under stress, Bitcoin’s dominance is emerging.
