Analysts: The Federal Reserve May Be Shifting Toward a Dovish Stance

Jinse Finance reported that on the 10th local time, after concluding a two-day monetary policy meeting, the US Federal Reserve announced a 25 basis point cut in the federal funds rate target range to between 3.50% and 3.75%. Another market focus was the Fed's announcement to expand its balance sheet starting this month. Specifically, the Fed stated that beginning this Friday local time, it will purchase $40 billion in short-term US Treasury bonds over the next 30 days, and it is expected that the scale of purchases will remain high in the coming months before gradually decreasing. Some analysts interpret this move as a form of "implicit" rate cut. Within the Fed, hawks usually focus more on inflation and tend to maintain high interest rates, while doves are more concerned with supporting the labor market and hope to lower rates. The market's focus has now shifted to the Fed's next policy direction. Although the dot plot shows that the Fed predicts only one rate cut next year, the same as the forecast three months ago, the market is betting that the Fed will cut rates more sharply next year. CME federal funds rate futures indicate that the market believes there is about a 68% probability that the Fed will cut rates two or more times in 2026. Some analysts, interpreting the Fed's published economic outlook, believe that the current Fed may be shifting toward a dovish stance.