一、Review of the meeting highlights
1. Monetary Policy
⦁The Federal Reserve cut its benchmark interest rate by 25 basis points to a range of 4.00%–4.25%.
⦁This is the first interest rate cut in 2025 and is a "risk management" policy rather than the beginning of a strong easing cycle.
⦁Powell made clear that there was limited support within the FOMC for a larger (50 basis points) rate cut, indicating that the committee remained cautious.
2. labor market
⦁Revised employment data indicated a significant cooling in the labor market.
⦁Although the unemployment rate remains low, it has begun to rise, employment growth has slowed, and downside risks have increased.
⦁Powell mentioned for the first time the structural impact of artificial intelligence (AI) on hiring, a factor that may continue to affect the job market.
3. Inflation expectations
⦁The transmission of tariff factors to inflation has weakened, and concerns about "the stubborn existence of tariff inflation" have decreased.
⦁PCE inflation is expected to be 2.7% year-on-year in August, and core PCE is expected to be 2.9%, close to the Fed's target, but there is a certain anti-inflation effect in the service industry.
⦁Long-term inflation expectations remain "as solid as a rock", indicating that confidence in the inflation anchor remains.
二、Macro interpretation
1. Monetary policy path
⦁This interest rate cut is more of a precautionary measure rather than a step towards a systemic easing cycle.
⦁The Federal Reserve will continue to maintain a data-dependent model, and whether to further cut interest rates in the future will depend on the extent of the deterioration in the job market and the speed of inflation decline.
2. Economic growth and employment
⦁The slowdown in employment and the impact of AI suggest that the US economy may enter a stage of structural adjustment characterized by low growth and technological substitution.
⦁If the unemployment rate continues to rise, consumption momentum may be suppressed.
3.Inflation structure
⦁The PCE data showed that although inflation was still above the 2% target, the downward trend was clear.
⦁The "anti-inflation" effect of the service industry may further lower core inflation, leaving room for moderate easing in the future.
三、Global market impact
1. The US dollar and exchange rates
⦁The US dollar is under pressure in the short term as the interest rate advantage narrows.
⦁Emerging market currencies are expected to get a temporary respite, but we need to be wary of fluctuations in liquidity.
2. Bond market
⦁The U.S. Treasury yield curve is flattening, and long-end yields may decline slightly.
⦁Interest rates around 4.0% are attractive to fixed-income assets, and the value of long-term U.S. Treasury bond allocations is increasing.
3. Stock market
⦁The interest rate cut provides sentiment support, and growth stocks and technology stocks (especially AI-related sectors) benefit.
⦁However, cooling employment and a potential slowdown in consumption may put pressure on cyclical sectors.
4. Commodities and gold
⦁Interest rate cuts and a weakening US dollar will support precious metal prices, and gold has both safe-haven and allocation value.
⦁Crude oil is still subject to demand uncertainty and attention needs to be paid to geopolitical risk premium.
四、Investment Advice
1. Fixed Income
⦁Gradually increase the allocation of medium- and long-term US Treasury bonds to lock in interest rate returns around 4%.
⦁Remain cautious on high-yield bonds as a cooling economy could bring default risks.
2. Equity Market
⦁Moderately increase allocation to technology and AI-related sectors, as there are significant structural opportunities.
⦁Maintain positions in defensive sectors (medical care, consumer staples) to hedge against the risk of slowing employment.
3. Foreign Exchange and Emerging Markets
⦁The US dollar may remain weak in the short term, so it is appropriate to increase allocations to some high-interest emerging market currencies.
⦁Focus on the Asian market, especially India and Southeast Asia, which have relative growth advantages.
4. Commodities and gold
⦁It is recommended to increase the allocation of gold as a hedging tool.
⦁Remain neutral on industrial metals as demand-side pressure remains.
五、Conclusion
This 25 basis point "risk management" rate cut marks the beginning of a moderate easing in the Fed's policy, but it does not mark a period of significant monetary easing. Investors should adopt a balanced allocation strategy:
⦁Seizing interest rate locking opportunities in the bond market
⦁Focus on technology and defensive sectors in the stock market
⦁Increasing gold's weighting among commodities