The Federal Reserve Cuts Rates Again Amid Unusual Internal Division
The latest meeting of the Federal Reserve announced a further 25 basis point cut in policy rates, continuing the easing trend of the year. However, unlike the previously consistent policy environment, this decision highlights a significant internal split not seen for years: several members held markedly different views on whether to continue rate cuts, reflecting a new intensity in disagreements over the economic outlook within the decision-making body. This internal tension has substantially weakened external confidence in the future pace of easing.
Statement Turns Cautious, Suggests Future 'Pause Cycle'
Policy statements revisiting the language of dependence on data for the "magnitude and timing" of rate adjustments have been seen by the market as a signal that the Fed is no longer committed to rapid rate cuts. Historically associated with policy turning points, this language has led investors to expect a potential slowdown in rate cuts and decisions being more driven by real-time economic performance. Analysts indicate that the Fed is shifting from a "continuous rate-cutting phase" to a "data-driven phase," lacking predictability in its policy path.
Powell: No Need for Rate Hikes, But Cuts Aren't Pre-set
During the press conference, Chairman Powell clarified several key points of concern. He explicitly ruled out rate hikes, emphasizing that current rates are in a range that neither contracts nor stimulates, describing it as a "state appropriate for patience." He also noted that the latest rate cut decision was quite close, with the committee facing "two-sided risks" of cooling labor markets and sticky inflation, complicating policy weighing.
Powell mentioned, unusually, that some economic data releases were delayed due to administrative factors, necessitating decision-making with incomplete information. He stressed that the Fed would not pre-commit to a series of cuts, with each future action being determined by economic developments.
Market Volatility: U.S. Stocks Surge, Dollar Drops, Gold Soars
Following the policy tone announcement, U.S. financial markets entered a phase of intense reaction. The Dow Jones index soared by over 600 points at one stage, while the S&P 500 and Nasdaq rose in tandem, as investors bet on a potentially extended favorable asset environment. In the foreign exchange market, the dollar index dropped rapidly, while non-U.S. currencies rebounded, reflecting market sensitivity to the rate cut path. Precious metals markets were particularly notable, with gold surging by over $50 in the short term, and sharp rises in silver and Bitcoin.
Traders pointed out that the market's increasing split in expectations was driven by the statement's neutral tone on easing, which simultaneously intensified short-term hedging and speculative sentiment.
Trump Increases Pressure, New Chairman Selection Enters Sensitive Phase
Meanwhile, President Trump continues to publicly pressure monetary policy. In a White House event, he criticized the rate cut as "too small," advocating for further substantial rate reductions to prevent hindering economic performance. He also revealed an acceleration in interviews with Federal Reserve chair candidates, including former Board member Kevin Warsh and various economic figures.
Trump's comments have heightened concerns about potential challenges to the Fed's independence, especially during a period when the direction of monetary policy is politically sensitive.
Increasing Complexity Ahead: Policy Path Depends on Data and Political Variables
As internal Fed consensus diminishes, market sensitivity increases, and the White House's direct commentary on rate direction escalates, the predictability of future policy paths is decreasing. Economists warn that if political factors further intervene, financial markets could face more frequent volatility cycles. In the short term, investors will focus on employment, inflation, and consumption data to assess whether the Fed will indeed enter a pause stage in the coming months.
