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2025-09-16 17:43:29
Expectations of Fed rate cuts surge; cautious communication may dominate. ⑴ Market expectations for multiple Fed rate cuts this year are rising. Thomas Matthews, Head of Markets, Asia Pacific at Capital Economics, noted that current pricing suggests the market is more priced in for dovish surprises than hawkish ones. This means any rate hike signal that exceeds market expectations is likely to trigger a more drastic reaction, while the threshold for a rate cut is relatively low. ⑵ Despite rising market expectations for a rate cut, the Fed's communication strategy is expected to remain cautious. Matthews believes the Fed is likely to continue adopting a cautious approach to communication to avoid overly revealing information, thereby avoiding overly misleading market expectations. This cautious approach aims to allow for greater flexibility in policymaking and address potential economic uncertainties. ⑶ Nomura analysts echoed this view in a report. They predict that the economic forecast and subsequent press conference will likely emphasize the "insurance" nature of the rate cut and explicitly indicate that the pace of policy easing will be gradual. This suggests that the Fed will adopt a cautious approach to easing monetary policy and will not rush into drastic interest rate adjustments. (4) This cautious communication strategy can, to some extent, be seen as a reflection of trading psychology. The Fed is attempting to strike a balance between calming market concerns about an economic slowdown while avoiding overstimulation. Investors should closely monitor every Fed statement and, in conjunction with macroeconomic data, assess its true intentions and future policy direction.
