The Pressures Weighing Heavily on Powell in the Interest Rate Decision

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Last week, most major Central Banks (CBs) returned to interest rate decisions - after the August summer break and the first 3 weeks of September observing recent economic data. The “dovish” club includes: Bank of Canada continues to cut interest rates -25bps from early September, ECB continues to lower interest rates -25bps, Bank of England holds interest rates steady and continues to monitor the economic situation after cutting in July… And most recently, Federal Reserve - the world's largest central bank, has joined with a big move: cutting interest rates by -50bps immediately!

The market was quite pleased right after: USD price immediately fell, bond yields fell, gold rose, and stocks rose… 

However, investors soon calmed down to re-examine the logic in this Fed decision. The market then gradually price-in a 50% chance of recession occurring in the first half of 2025: USD rose back, medium-long term bond yields rose, stocks dipped slightly on Friday…

However, Viet Hustler also believes that recession pressure is not the main or only reason why the Fed decided to cut -50bps interest rates immediately. Therefore, this week's macroeconomics article from Viet Hustler is dedicated to analyzing in more detail the pressures on the Fed when making this interest rate decision.

Disclaimer: Some comments below carry the author's subjective opinion - and are not investment advice!