After last week's large-scale sell-off, the market is still in a tense state, and investors have divergent expectations for a 50 basis point and 25 basis point rate cut in September. Danielle DiMartino Booth, CEO and Chief Strategist of QI Research, warned that "everything is unpredictable" if it spreads to other markets.

DiMartino Booth stated that the Federal Reserve is lagging behind in monetary policy easing and will be forced to catch up.

DiMartino Booth said, "I think they have no choice before September 18th, they will have to cut interest rates by 50 basis points. They can try to say some harsh words, but as the data momentum continues, they will have no choice at some point, or they will look completely sluggish or numb, really, because there are no better words left

At the beginning of last week, Wall Street experienced its worst day since 2022, and some market participants began to question whether the Federal Reserve would be forced to urgently cut interest rates if there were greater market volatility.

DiMartino Booth warns that an emergency rate cut by the Federal Reserve could lead to unforeseen consequences as it would confirm investors' worst-case scenario for the US economy.

She explained, "If the Federal Reserve urgently cuts interest rates now, it may confirm what investors are most worried about. They may say, 'Oh, the Federal Reserve thinks the situation is too bad, they have to do something that usually only happens in financial crises,' and the small collapse of the US stock market is not a reason for the Federal Reserve to consider an emergency interest rate cut at this time

But there is a situation where the Federal Reserve may be open to emergency interest rate cuts, and that is the risk of contagion.

She pointed out, "If we start seeing the spread to the credit market, the situation will be completely different. Fed Chairman Powell's nightmare is whether bond issuance will dry up, which is within the Fed's jurisdiction. If we start seeing credit dry up, this may prompt the Fed to urgently cut interest rates.