Mon, September 16, 2024 at 16:09

• 

  Kang-hoon

  • Hello, Annie.

  • Today, I have some significant news regarding the Federal Reserve and its potential interest rate cut.

  • 
• Annie

  • Oh, that sounds important!

  • What's happening?😊

  
• 

  Kang-hoon

  • Three Democratic senators, led by Elizabeth Warren, are urging Federal Reserve Chair Jerome Powell to slash the central bank's interest rate by 75 basis points.

  • They sent a letter to Powell on Monday emphasizing the urgency of this rate cut to avoid a recession.

  • 
• Annie

  • Wow, 75 basis points is quite a large cut!

  • Why are they pushing for such a drastic measure?🤔

  
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• 

  Kang-hoon

  • The senators argue that an aggressive approach is necessary to mitigate potential risks, particularly in the labor market.

  • They believe that a cautious stance could needlessly risk the economy heading towards a recession.

• Annie

  • I see.

  • So, what has the Fed done in the past regarding such large adjustments?

  
• 

  Kang-hoon

  • The last time the Federal Reserve made a drastic 75-basis-point adjustment was in 2022, but that was to raise rates in response to soaring inflation.

  • Currently, inflation is cooling and approaching the Fed's target of 2%, which is why the senators believe a large cut is justified now.

• Annie

  • Interesting.

  • How are investors and other political figures reacting to this?

  
• 

  Kang-hoon

  • Investors are divided over the size of the potential cut.

  • Some are leaning towards a quarter-point reduction, while others see a 50 basis points cut as more likely.

  • According to the CME FedWatch tool, there's a 59% chance of a 50 bps rate cut.

  • However, the letter from the senators signals a growing belief among some policymakers that the Fed needs to act more decisively.

• Annie

  • What about the impact on the crypto and stock markets?

  • Will this rate cut affect them?

  
• 

  Kang-hoon

  • A 75-basis-point rate cut could significantly impact both the crypto and stock markets.

  • Lower interest rates generally increase liquidity in the financial system, encouraging investors to seek higher returns in riskier assets like crypto and stocks.

  • Reduced borrowing costs can also boost investor sentiment, potentially driving more capital into these markets.

• Annie

  • That sounds like it could be a good thing for investors!

  • But are there any long-term risks?

  
• 

  Kang-hoon

  • Indeed, while the short-term effects might be positive, the long-term impact will depend on broader economic trends and related regulatory actions.

  • It's crucial to consider these factors when making investment decisions.

• Annie

  • Got it.

  • So, overall, do you think this news is good or bad for the market?

  
• 

  Kang-hoon

  • In the short term, I would say it's good news.

  • The potential rate cut could boost liquidity and investor sentiment, which might lead to a rally in both the crypto and stock markets.

  • However, it's essential to stay informed and cautious about the long-term implications.

• Annie

  • Thank you, Kang-hoon!

  • That was very insightful.😊

  
• 

  Kang-hoon

  • You're welcome, Annie.

  • Always happy to help!

  • Upon comprehensive consideration, this news is perceived as a 😍Bullish.