On September 17, the Federal Reserve is about to usher in a policy turning point.This is not only because it may resume interest rate cuts for the first time since the end of last year, but also because its decision-making structure, policy orientation and internal differences send signals that will profoundly affect the sentiment and expectations of global financial markets in the coming months and even longer.Compared with traditional interest-rate discussions, this meeting had many highlights, large variables, and complex positions, making it "the most peculiar meeting in recent years."

A 25 basis point rate cut is almost a foregone conclusion. Disagreements within the Federal Reserve intensify

From the perspective of policy motivations, this interest rate cut is largely based on the recent weak employment data in the United States.The August non-farm payrolls report showed that new jobs were lower than expected, and the unemployment rate rose slightly. Previous job vacancies and labor mobility indicators also showed that the labor market was fading.Compared with inflation data (although still above target), employment data is more sensitive to Powell.At the just-past annual meeting of global central banks in Jackson Hole, Powell sent a policy signal to pay more attention to employment, which has clearly hinted at a subtle shift in policy stance.

Markets generally expect the Federal Reserve to cut interest rates by 25 basis points.According to CME's "Fed Observation" tool, as of the meeting, the probability of a 25 basis point rate cut was as high as 96%, while the probability of a 50 basis point rate cut was only 4%.Although a very small number of traders are still hedging against the possibility of aggressive interest rate cuts, mainstream financial institutions generally agree that the Fed will adopt a relatively moderate easing stance to avoid market interpretation as policy panic.

Another key highlight of this meeting is that policy positions within the Fed are becoming increasingly divided.On Monday, the U.S. Senate narrowly approved the nomination of Trump-era economic adviser Milan as a council member; meanwhile, Director Cook "narrowly" retained his seat in a legal dispute with the previous administration.Such temporary changes are extremely rare in the history of the Federal Reserve and to some extent also indicate that the game of future policy formulation will become fierce.

At the July meeting, two directors had objected to keeping interest rates unchanged.According to Deutsche Bank's forecast, if the interest rate cut by 25 basis points takes place, at least three members may hold different opinions, including officials supporting a one-time interest rate cut of 50 basis points, and members advocating maintaining the status quo.This division may even surpass the September 2019 meeting and become the most divided resolution since 1988.

The dot chart is expected to become the focus of Powell's press conference

For the market, the interest rate "dot matrix" is undoubtedly one of the biggest focuses of this meeting.Since the Federal Reserve introduced the dot chart mechanism in 2012, it has become a core tool for assessing interest rate paths and policy directions.This meeting coincides with the update of quarterly economic forecasts. The outside world is particularly concerned about whether the interest rate forecast for 2025 will be loosened, whether there will be more interest rate cuts during the year, and whether the outlook for 2026 and long-term neutral interest rates will be lowered.

Bank of America predicts that the Federal Reserve will cut interest rates once in September and December, bringing the median federal funds rate to 3.875% at the end of the year.If the dot chart supports this path, the market will believe that the Fed maintains "moderate easing"; on the contrary, if it is forecast to maintain two interest rate cuts or even reduce them during the year, it will be regarded as a "biased eagle" stance, which may suppress the market to some extent.

Just as important as the dot chart is Federal Reserve Chairman Powell's statement at the press conference.Powell has expressed his strong concern about the job market in several speeches recently and has hinted that "if price pressures are caused by tariffs or other temporary shocks, the Fed will not rush to respond."This stance echoes the echoes of the "inflation temporality" in 2021, but now more reflects his attempt to maintain market confidence in the early stages of the economic slowdown.

Matthew Luzzetti, chief U.S. economist at Deutsche Bank, pointed out that Powell's press conference could be a "crisis public relations challenge."The outside world will watch closely whether he will defend this interest rate cut and how to respond to the split positions within the board of directors.Especially after Milan officially joined the voting, concerns about "Trump's influence" penetrating into the Federal Reserve are growing.

Risk appetite or reassessment of financial markets for big test

How will the Federal Reserve's interest rate cut affect financial markets?From historical experience, the first interest rate cut often brings about periodic increases.Ned Davis Research data shows that in the past four rounds of "precautionary interest rate cuts" cycles, the S & P 500 index achieved positive returns in the following 12-24 months, with the most outstanding performance in the financial, industrial, and non-essential consumer sectors.

However, this does not mean a "risk-free rise", because if subsequent economic data continues to deteriorate, preventive interest rate cuts may turn into a "recession-style interest rate cuts."By then, the market style may shift from cyclical assets to defensive categories, such as medical care and consumer necessities.Industrial Securities research pointed out that when the Federal Reserve launched interest rates in 2000 and 2007 due to recession, both A shares and Hong Kong stocks were dragged down by the global economic contraction; while 2019 and 2024 (this round) were a more moderate liquidity release stage, the market is more positive.

With the Federal Reserve starting to cut interest rates and inflation not yet fully controlled, gold has once again gained market favor.Bank of America analysis pointed out that in the past 25 years, when the Federal Reserve launched interest rates against the background of high inflation, gold has never experienced negative returns in the next 12 months.If history repeats itself, gold may gain strong support in the current macro environment.

Bank of America commodity strategist Michael Widmer even proposed in his latest report that gold prices are expected to climb to $4000 per ounce in 2026.When the market expects the Federal Reserve to enter the channel of continued interest rate cuts, the appeal of gold is being repriced and has become an important choice for current macro hedging.