Federal Reserve Cuts Interest Rates By 50 Basis Points

According to PANews, the U.S. Federal Reserve has announced a reduction in the federal funds rate target range to 4.75% to 5%, marking a 50 basis point cut. This is the first rate cut by the Federal Reserve since 2020 and exceeds market expectations. Analysts note that historically, the Federal Reserve rarely cuts rates by 50 basis points at the start of a new rate-cutting cycle unless faced with a significant economic crisis. This move indicates the Federal Reserve's aggressive monetary easing measures to address potential downside risks in the U.S. economy. The decision reflects the Federal Reserve's heightened vigilance regarding the current economic situation, particularly in the face of slowing consumer spending, shrinking manufacturing, and a weak job market. The aim is to achieve a 'soft landing' for the economy and avoid a deeper recession. In a rate-cut environment, a loose monetary policy typically leads to an abundance of liquidity, providing a relatively favorable growth space for high-risk assets. Analysts point out that virtual assets, due to their high volatility and strong risk preference attributes, have become an important choice for investors seeking high returns. Especially in the context of the Federal Reserve's continued easing policy, concerns about the depreciation of fiat currency purchasing power may further drive demand for virtual assets. Generally, the short-term fluctuation in asset prices due to rate cuts depends on the market's interpretation of the rate cut—whether it is seen as a warning signal of potential economic issues or a positive expectation of liquidity injection. Federal Reserve rate cuts typically lower borrowing costs and release more liquidity into the market, which is often viewed as favorable, pushing up the prices of risk assets. However, if the market perceives the rate cut as too large or untimely, it may suggest deeper structural economic problems, such as slowing economic growth, a weak job market, or rising inflationary pressures. These factors could trigger investor concerns, leading to asset price volatility or even declines.