#美联储降息预期升温 The Federal Reserve is about to cut interest rates, and the global market is迎来转折点

Market expectations for the Federal Reserve to cut interest rates have reached 94.2%. This is not only a signal of a shift in monetary policy but will also become a catalyst for the repricing of global assets.

In the early hours of this Thursday, Beijing time, the Federal Reserve is set to announce its first interest rate cut in nine months to address the slowdown in the U.S. labor market and persistent inflation issues.

Market data shows that traders have assigned a 94.2% probability to the pricing of a 25 basis point rate cut at this meeting. This expectation is supported by recent economic data—U.S. non-farm payrolls grew significantly slower in August, the unemployment rate rose to 4.3%, and inflationary pressures continue to ease.

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01 Economic Background: The job market is showing warning signs, and inflationary pressures remain.

The U.S. job market has shown significant weakness recently. In August, non-farm payrolls increased by only 22,000, far below the market expectation of 75,000.

What is even more concerning is the significant downward revision of employment data by the U.S. Department of Labor over the past year. According to statistics, in the 12 months ending March 2025, the actual increase in employment was 910,000 jobs less than initially reported, marking the largest downward revision since 2000.

Inflation presents a complex situation. In August, the US CPI rose 2.9% year-on-year, and the core CPI increased by 3.1% year-on-year, still above the Federal Reserve's target of 2%. Housing costs surged 0.4% month-on-month, marking the largest increase of the year, while used car prices jumped 1%, indicating that inflationary pressures remain.

02 Policy Shift: From Preventing Inflation to Ensuring Employment

The Federal Reserve's policy balance has shifted from strictly guarding against inflation to ensuring a "soft landing" for the economy.

After Powell's dovish remarks at the Jackson Hole global central bank summit in August, the current round of interest rate cuts officially began. He hinted at the time that, given the rising risks in the labor market, a rate cut might occur in September, but also warned that inflation still poses a threat.

This policy shift reflects a change in the focus of the Federal Reserve's dual mandate (maximum employment and price stability). As the risks of a deteriorating job market increase, while inflation remains relatively under control, the Federal Reserve has opted for a preemptive rate cut strategy.

03 Interest Rate Cut Expectations: Discrepancies in Magnitude and Rhythm

There is some divergence in the market regarding the extent of interest rate cuts:

· Mainstream Expectation: A rate cut of 25 basis points (Probability 94.2%)
· Minority view: A 50 basis point rate cut (Standard Chartered Bank)

However, expectations for the start of the interest rate cut cycle are relatively consistent. Several institutions have already adjusted their forecasts for the Federal Reserve's interest rate cut path:

Institution Expected Rate Cut Path Terminal Rate Expectations
Morgan Stanley cut by 25 basis points to 3.375% in September, October, December, and January 2026.
Deutsche Bank to cut interest rates three times in the remaining time of 2025, and pause rate cuts in 2026.
CITIC Securities cut rates by 25 basis points in September, October, and December as a preventive measure.

04 Market Impact: Repricing of Various Assets

The Federal Reserve's interest rate cuts will have a profound impact on global assets:

In the US stock market, there are usually three main characteristics during preventive interest rate cuts: first, the Fed Put provides a floor, making it difficult for the market to have a significant downward adjustment; second, indices or sectors that are sensitive to interest rates perform outstandingly; third, interest rate cut trades typically last for about three months following the first cut.

The U.S. Treasury market may experience a "buy the expectation + sell the fact" pattern. Currently, there are no recession expectations in the market, and after the interest rate cut is implemented, the U.S. Treasury yields are unlikely to have significant downward momentum.

The US dollar index may maintain relative weakness. After this round of interest rate cuts, the US economic growth may rebound and the interest rate differential between the US and Europe may no longer converge further, at which point the US dollar index may see some recovery.

Gold has performed well in the interest rate cut trades. Considering the possibility of further dollar weakness and the unresolved issue of Trump dismissing Cook, the independence of the Federal Reserve will continue to be scrutinized by the market, and gold is expected to perform well.

05 Political Pressure: The Influence of Trump Cannot Be Ignored

President Trump has repeatedly criticized the Federal Reserve for its slow pace of interest rate cuts. He also attempted to fire Federal Reserve Governor Lisa Cook, although the dismissal has been temporarily halted by the courts, the government has appealed the court's decision.

Trump also nominated a confidant to the Federal Reserve Board, and if confirmed by the Senate in a timely manner, this person may participate in this week's monetary policy meeting. This has raised concerns about the independence of the Federal Reserve.

Trump's tariff policy also poses upward risks for future inflation. Given that current inflation has not yet fully stabilized at the Federal Reserve's target level, the decision to significantly cut interest rates will face more trade-offs.

06 Historical Reference: Lessons from Preventive Rate Cuts

The asset performance during the three preemptive interest rate cuts in 1995, 2019, and 2024 can be referenced for this interest rate cut.

Historical data shows that the S&P 500 index tends to yield positive returns within 12 to 24 months after the Federal Reserve's first or renewed interest rate cuts. However, the economic backdrop determines the effectiveness of monetary easing policies.

According to data from Ned Davis Research, in periods where the economy is relatively strong and the Federal Reserve has only implemented one or two rate cuts after restarting rate reductions, cyclical sectors such as financials and industrials outperform the broader market.

However, in a period of relatively weak economy where four or more significant rate cuts are needed, investors tend to prefer defensive sectors, with the median returns of the healthcare and consumer staples sectors being the highest.

07 Global Impact: Emerging Markets May Benefit

The Federal Reserve's rate cuts are usually beneficial for emerging markets. During periods of a weak dollar, emerging market equities benefit from external liquidity easing, coupled with policy stimulus or industrial factors acting as catalysts, resulting in significant upward potential.

For China, international capital may increase the allocation to Chinese assets, boosting stock market performance. The RMB may appreciate against the US dollar, making imported goods cheaper, and reducing the costs of studying abroad, traveling, and shopping.

Chinese companies with dollar-denominated debt will see their financial pressure ease as financing costs decrease.

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As of September 2025, gold prices have surged by 40% within the year, becoming the biggest winner under the expectation of interest rate cuts. The three major U.S. stock indices continue to approach historical highs, with the Nasdaq 100 index rising consecutively.

The future market direction depends on three major factors: the pace and extent of the Federal Reserve's interest rate cuts, whether AI trading can continue to drive growth, and whether tariff risks will trigger higher inflation.

Regardless of the outcome, this week's Federal Reserve decision will become the most important turning point in the global financial markets in 2025.