The Federal Reserve announced a 50 basis point interest rate cut on Wednesday, ushering in a policy easing cycle. It is expected that the Fed will steadily ease monetary policy during this cycle. The first interest rate cut is larger than usual, aimed at boosting the cooling job market while continuing to push down inflation.

Federal Reserve Chairman Powell stated that the risks facing the Fed's dual mission are "basically balanced" at present, and today's interest rate cut marks a "strong start" to protect the economy and labor market strength, and should be seen as a commitment that the Fed will not fall behind in the development of the situation.

Federal Reserve Governor Bauman opposes this decision and supports a 25 basis point rate cut.

Decision makers predict that the Federal Reserve's benchmark interest rate will decrease by another 50 basis points before the end of the year, with a 100 basis point cut in 2025 and a 50 basis point cut in 2026. The target range for the benchmark interest rate will ultimately fall to 2.75% -3.00%.

According to calculations by the London Stock Exchange Group (LSEG), the federal funds rate futures market digested the possibility of the Federal Reserve cutting interest rates by about 74 basis points before the end of this year on Wednesday.

Prior to the Federal Reserve's policy decision, the interest rate futures market expects a rate cut of approximately 113 basis points by the end of this year.

US interest rate futures also bet that the Federal Reserve will cut interest rates by 25 basis points at its meeting on November 6-7, with a probability of 64% for a 25 basis point cut and a probability of 36% for a 50 basis point cut.

The expectation for interest rates before the end of next year remains largely unchanged, with traders expecting a further 190 basis points cut by the end of 2025, which is consistent with the 240 basis points expected by the Federal Reserve before Wednesday's rate cut.

This means that by the end of 2025, the benchmark interest rate will be 2.9%, lower than the 3.4% envisioned by Federal Reserve officials in their latest forecast released on Wednesday.

Here is a summary of analyst comments:

FOREX LIVE Chief Currency Analyst ADM BUTTON: Another 50 basis point interest rate cut will be implemented in November

Powell has been dovish throughout his tenure, and his actions today highlight this. It is clear that Powell does not want to fall behind in the interest rate cut cycle and has decided to take the initiative. He made it clear at the Jackson Hole Conference that he does not want to see the labor market further deteriorate, and I expect him to convey this message at a press conference. If employment data further weakens, he will cut interest rates by another 50 basis points in November

Until recently, the market still believed in the exceptionalism of the US dollar and the notion that US economic growth would outperform, believing that US interest rates would remain at a higher level than other regions. It is now clear that the pace of interest rate cuts by the Federal Reserve will be as fast, or even faster, than other G10 central banks. Therefore, if the Federal Reserve adopts this pace, the US dollar will lose a lot of momentum

This is a bold action, and I believe history will prove it right. The bond market says it has won the inflation battle, and there is room for interest rates to fall all the way to 3% before the Federal Reserve has to stop thinking

SPARTAN CAPITAL SECURATIES Chief Market Economist Peter CARDILLO: May cut interest rates by another 50 basis points before the end of the year

I originally expected a 25 basis point interest rate cut. I thought they would be gradual, but they were much more generous than I expected. The most surprising thing is that they hinted at further interest rate cuts, possibly by another 50 basis points before the end of the year“

The actions of the Federal Reserve are dovish. I think their biggest concern is that the labor market has become too weak, and I think that's why they're doing this“

The initial reaction of the market was positive. However, as investors begin to worry about the economic situation, the situation we are seeing in the market now may change in the coming days

Fitch Senior Executive ERIC ORENSTEIN: May increase downward momentum in mortgage rates

The Fed's 50 basis point interest rate cut may increase the downward momentum of mortgage rates, which have dropped significantly since May as US bond prices have risen. Although it is not enough to drive a comprehensive refinancing boom, the 30-year average interest rate of nearly 6% has indeed opened up a considerable market for refinancing. Institutions that issue mortgages will benefit from it, and they may find that the most difficult period has passed

Federal Reserve Messenger: The Fed is actually making up for lost time

Nick Timiraos, the voice of the Federal Reserve, recently wrote that the Fed voted today to lower interest rates by 0.5 percentage points, marking the first rate cut since 2020 and a bolder start.

Powell's decision to cut interest rates exceeded the expectations of most analysts a few days ago, and this decision has firmly put the Federal Reserve into a new stage of fighting inflation: the Federal Reserve is currently trying to prevent previous interest rate hikes from further weakening the US labor market.

This decision reflects our increasing confidence that by adjusting our policy stance appropriately, we can maintain the strong momentum of the labor market. Although some Federal Reserve officials have argued in recent weeks that the economy is not weak enough to warrant a 50 basis point rate cut, others have concluded that the cooling of the labor market this summer warrants further rate cuts because the Fed is actually making up for lost time.

Bank of America: The Federal Reserve's interest rate cuts are aimed at protecting employment, and the next two rate cuts are expected

Tom Hainlin, a senior investment strategist at Bank of America, said that we have no particular opinion on whether to cut interest rates by 25 basis points or 50 basis points. So we won't necessarily be surprised. Looking ahead, at least from now until the end of the year, it is expected that there will be two more interest rate cuts. As inflation begins to approach the target, it is not surprising that Powell's mission in terms of employment is focused on, as he is concerned about potential downside risks in the labor market. There are indications that the labor market may be weaker than the data suggests. Therefore, this seems to be a relative insurance measure for the labor market to prevent an increase in unemployment and maintain good economic performance.

The 'New Bond King' expects the Federal Reserve to cut interest rates by another 75 basis points before the end of the year

Doubleline Capital CEO Jeffrey Gundlach, known as the "new bond king," said in an interview that he expects to cut interest rates by another 75 basis points before the end of the year, assuming a baseline scenario of a terminal rate for the federal funds rate of 3.50%.

Gundelek said that the Federal Reserve is not as lagging behind the situation as before. The likelihood of the Federal Reserve cutting interest rates by 50 basis points in November after the election is much higher.

Gundelek stated that Powell acknowledges the existence of human factors in the employment data. The current data supports Powell's statement that the economy has not shown significant pressure. We should not worry about short-term inflation.

Gundelek pointed out that it is expected that future economic data will be even weaker. The Consumer Price Index (CPI) may fall below 2% in a few months and remain at that level. The inflation rate and economic uncertainties are what will happen in the real estate market.

Gundelek also stated that inflation risk is lower than employment and consumer risk. With the weakening of the US dollar, it may be time to start increasing exposure to emerging markets. The long-term bond market does not want the Federal Reserve to aggressively relax its policies.

Analyst Adam Button: There is still a lot of room for the US dollar to fall

Forex analyst Adam Button stated that Powell has been dovish throughout his tenure, and he emphasized this today. It is obvious that Powell does not want to fall behind the curve during the interest rate cut cycle and has decided to take the initiative. He had made it clear at the Jackson Hole Conference that he did not want to see the labor market deteriorate further and expected that if employment data showed further weakness, there was a possibility of another 50 basis point interest rate cut in November. Until recently, the market still believed in the 'dollar exceptionalism', believing that the US economy would perform well and interest rates would remain at higher levels than other regions. It is now clear that the Federal Reserve's rate cuts will be as fast as, or even faster than, other G10 central banks. Therefore, if the Federal Reserve continues to do so, there is still a lot of room for the US dollar to fall. Overall, this interest rate cut is a bold move, and I believe history will judge it as correct. The bond market suggests that the fight against inflation has been won, and there is room for interest rates to drop all the way to 3% before the Federal Reserve has to stop thinking.

Analyst Steve Sosnick: The market is taking advantage of the Federal Reserve's interest rate cuts

Market strategist Steve Sosnick said, 'I don't understand why the Fed's 50 basis points is really necessary, but it's clear that this is the message the Fed wants to convey.'. What surprised me was that even if the market gets what they superficially want, they immediately want more. The new dot plot tells us that there are expected to be about two 25 basis point interest rate cuts for the rest of this year, but the futures market is pricing for four. The expectation of about four interest rate cuts in 2025 is basically consistent, but this still means that the market expects a larger rate cut than implied by the Federal Reserve. It is important to note that the stock market did not soar after obtaining what they wanted (at least not yet). After 7 consecutive trading days of gains, a lot of good news has been priced in.

Institutional natural language processing model: Powell's press conference is not as "eagle" as last time

The institutional natural language processing model shows that Powell was not as hawkish at this press conference as he was at the July meeting, but also not particularly dovish. This model indicates that Powell's prepared speech contains both more hawkish and more dovish sentences. Analyst Richter said, "Given that the Federal Reserve has cut interest rates by 50BP and the median expectation of committee members is that there is still at least 1.5% room for a rate cut, people would think that the opening remarks would be more dovish than the model suggests

Analyst Scott Helfstei: Fed cuts 50 basis points may be too aggressive

Scott Helfstein, head of Global X investment strategy, said that the Federal Reserve hoped to start a cycle of interest rate cuts, but it would not trigger an asset foam, but a 50 basis point interest rate cut might be too radical. We have already witnessed the Federal Reserve cutting interest rates by 50 basis points in advance, which may be seen as the Fed's concern about economic weakness. However, strong fundamentals in the coming weeks may calm the market and prevent funds from leaving.

Economist El Erian: Powell doesn't want to admit that today's action is a supplement to the no rate cut in July

Economist El Erian said that at the press conference, faced with repeated questions from reporters, Federal Reserve Chairman Powell had to deal with the contradiction between the unusual move of starting the interest rate cut cycle with a 50 basis point cut and repeatedly evaluating "good economic conditions". This has become even more tricky, and it is understandable that he does not want to admit that today's 50 basis point rate cut is an "addition" to the no rate cut in July.

Goldman Sachs: The threshold for the Federal Reserve to increase interest rate cuts is very low

Lindsay Rosner, head of multi department investments at Goldman Sachs Asset Management, said: The Federal Reserve has achieved what the market wants. The market is satisfied with the Federal Reserve. The market is still ahead of the Federal Reserve and is expected to continue cutting interest rates by 75 basis points this year (the Federal Reserve's dot matrix shows 50 basis points). Due to the unemployment rate and PCE estimates being very close to current levels, the Federal Reserve can easily cut interest rates even more than shown in the dot matrix.

Fidelity International: Fed cuts 50 basis points seem to be preemptive

Salman, Global Head of Macro and Strategic Asset Allocation at Fidelity International? Ahmed said that the Fed's 50 basis point rate cut "seems to be preemptive". The dot plot and comments at the press conference both highlight that the Federal Reserve will be more cautious in terms of the speed and intensity of policy easing in the future. In summary, this is a hawkish 50 basis point interest rate cut. Any further weakness in the labor market will lead to more and faster interest rate cuts, and now the market knows this. Fidelity International still believes that the most likely outcome this year is a soft landing for the US economy, where inflation slows down without the economy falling into recession.

Vontobel: Federal Reserve initiates interest rate cuts, increasing attractiveness of emerging market assets expected

After the Federal Reserve cut interest rates by 50 basis points, Carlos de Sousa, emerging market debt portfolio manager at Vontobel, said that the global financing environment will continue to ease in the coming months, which will help emerging market central banks continue their loose policies. This will create space for multiple emerging market central banks to restart or continue their easing cycles that have already begun before the Federal Reserve. The lower risk-free interest rates in developed countries will also lower the external borrowing costs of emerging market issuers, thereby reducing refinancing risks and enhancing debt sustainability. The loose cycle will encourage asset allocators to increase their risk exposure to emerging markets, as the attractiveness of money market instruments and core developed country interest rates will gradually decline.

Analyst Anster: Powell himself seems more inclined to cut interest rates by 50BP

Analyst Anster pointed out that Federal Reserve Chairman Powell said at the press conference, "We have started cutting interest rates very well and strongly. I am glad we have done it." This statement seems to confirm the hypothesis of some Fed observers that Powell himself is more inclined to cut interest rates by 50 basis points and hopes to gain support from other members of the committee for this decision.

Analyst Anster also pointed out that from the perspective of economic growth and inflation expectations, the description is entirely a soft landing scenario: policymakers have median growth expectations of 2% for this year, next year, as well as 2026 and 2027. It is expected that inflation will basically return to the target level next year - expected to be 2.1% by the end of 2025 and 2% by 2026.

Nationwide economists: Federal Reserve expected to continue rapid interest rate cuts

The Chief Economist of Nationwide stated that there is still more work to be done, and it needs to be done quickly: "We expect the Federal Reserve to continue to rapidly lower interest rates to support a soft landing - this is our basic forecast

Citigroup: Federal Reserve shifts focus to labor market, employment data will become important reference

Jabaz Matai, head of monetary rates and forex strategy at Citigroup G10, said that the Federal Reserve is shifting its focus to the weak labor market, which means that as traders try to predict the direction of Fed policy, the status of unemployment claims and unemployment rates will become increasingly prominent. I believe the market will continue to readjust its expectations for the Federal Reserve's interest rate cuts in November and December based on data on the number of people applying for unemployment benefits. Other indicators that focus on industrial and commercial activities will play a secondary role.

Laffer Tengler: Fed cuts 50 basis points or moves too quickly

Nancy Tengler, CEO and Chief Information Officer of Laffer Tengler Investments, said, 'I think the Federal Reserve may have acted too hastily when cutting interest rates by 50 basis points.'. The US economy is slowing down, but still strong. Stable productivity and moderate unit labor costs. The unemployment rate may indeed rise, but we haven't seen any layoffs - the number of unemployed people is still significant, far higher than pre pandemic levels. My criticism of the Federal Reserve has always been its short-sighted focus on past data. It feels like this. A weak employment report has put us in such a situation.

As predicted by the Federal Reserve, it is expected to remain stable at 4.4%, and we believe that this interest rate cut increases the likelihood of such an outcome occurring

Sparta Capital Securities economist: Fed's biggest concern is labor market becoming too weak

Peter Cardillo, Chief Market Economist at Sparta Capital Securities, said, 'I originally expected the Federal Reserve to cut interest rates by 25 basis points, thinking it would be gradual, but they were much more' generous' than I had imagined. '. The most surprising thing is that they have already stated that they will further cut interest rates, possibly by another 50 basis points before the end of the year. The actions of the Federal Reserve are dovish. I think their biggest concern is that the labor market has become too weak, and I think that's why they're doing this today. The initial market response was positive. But what we are seeing in the market now may change in the coming days as investors begin to worry about the economy.