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market analysis
Whoever is elected as the next Fed chairman will choose to intensively cut interest rates
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: No matter who is elected as the next Federal Reserve Chairman, he will choose to intensively cut interest rates." Hope it will be helpful to you! The original content is as follows:
XM: No matter who is elected as the next Federal Reserve Chairman, he will choose to intensively cut interest rates.
XM Exchange www.xmspot.comment: Under Trump's high pressure, cracks are appearing within the Federal Reserve. Earlier this month, Federal Reserve Director Kugler resigned for unknown reasons, absent from the Federal Reserve's interest rate decision on July 31 and left the Federal Reserve on August 8. The official only gave an explanation of "personal reasons", but outside speculated that Kugler might have resigned because of disagreement with Chairman Powell. After Coogler left, Trump took advantage of the situation and arranged for Stephen Milan, the current chairman of the White House Economic Advisory www.xmspot.committee, to fill the vacant position. Stephen Milan is very likely to support a rate cut when the next Fed rate decision votes. With a total of 12 voters, more people will tend to cut interest rates.

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Feder Chairman Powell has a firm will and has always insisted on not cutting interest rates on the grounds of potential high inflation. However, a month before Trump entered the White House, the Federal Reserve was still maintaining its path to cut interest rates. On December 18, 2024, the Federal Reserve announced a 25 basis point interest rate cut, with the benchmark interest rate reaching 4.25~4.5%. A month later, Trump was elected as the new president, and the Federal Reserve has remained silent until now. This makes people wonder that the Fed may have chosen not to cut interest rates because of some political stance. Of course, Powell's explanation is that Trump's tariff policy may be the fuse to ignite inflation data, and it is necessary to maintain high interest rates until there is no definite evidence that tariffs will not push up inflation.

▲XM chart
The reality is that the U.S. labor market is upset. The non-farm employment report in July showed that the non-farm employment population after the season adjustment was only 73,000, far lower than the previous value of 147,000 (14,000 after the correction), and lower than the expected value of 110,000. The U.S. unemployment rate rose from 4.1% to 4.2%. Regardless of whether the U.S. inflation data will soar due to tariff policies in the future, at this stage, the U.S. labor market has shown signs of weakness due to high interest rates. One of the Fed's dual tasks is to maintain the stability of the labor market. If the Fed adheres to a high interest rate policy, the non-farm employment population may decline month by month, and the unemployment rate It is also possible to approach the 5% warning line.
Trump has two choices. The first is to force Powell to resign, and the second is to wait until Powell's term expires to re-nominate the Federal Reserve Chairman. In the past few months, Trump obviously planned to use the first method, so the problem of overspending the renovation of the Federal Reserve headquarters building was overspent. Trump said that renovation projects only cost tens of millions of dollars, and there is no need to reach more than two billion dollars. It seems reasonable to dismiss Powell on the grounds of "grave negligence". However, former Federal Reserve Chairman Yellen publicly stated that the independence of the Federal Reserve is very important, and Trump's dismissal of Powell is not worth the cost. Vice President Vance and Treasury Secretary Becent also changed his attitude , want to give up the first method.
Now, Trump still criticizes the Federal Reserve and Powell, but no longer mentions the content of dismissing Powell. It can be seen that Trump wants to take the second route and nominates a new Federal Reserve Chairman after May next year. In order to prevent the new chairman from following Powell's imitation, he will definitely conduct strict screening among the candidates. Only those who are determined to cut interest rates may be nominated. Therefore, we believe that no matter who is elected as the next Federal Reserve Chairman, he will choose to cut interest rates intensively.
XM Risk Warning, Disclaimer, Special Statement: The market is risky, and investment should be cautious. The above content only represents the points The analyst's personal opinion does not constitute any operational advice. Please do not regard this report as the only reference basis. In different periods, analysts' views may change, and the update will not be notified separately.
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