According to caixin.com on November 8th (Editor Xiaoxiang), US stocks hit a new historical high again, US bonds rebounded sharply, and commodity prices rose across the board - if measured by the comprehensive performance of cross-asset, yesterday may have been the best performing day of the year for the Fed interest rate market.

At the close, the Nasdaq closed above 19,000 points for the first time, and the S&P 500 index approached the 6,000 point mark, marking the 49th historical high of the S&P 500 index so far this year. Meanwhile, after the surge in US bond yields following the election results, the bond market saw a general decline in yields, finally easing the selling pressure. At the same time, the spot price of gold recovered the $2,700 per ounce level.

Behind the market-wide rise is the 'dive' of the US dollar. The ICE US Dollar Index fell 0.67% in the New York session on Thursday, to 104.40, marking the largest single-day decline since August. However, even so, the dollar has only retraced about half of its gains since Trump's election victory - it had risen as high as 105.45 during Wednesday's trading.

From the Fed's decision, the Fed announced on Thursday a 25 basis point rate cut to 4.5%-4.75%, as expected by the market, marking the latest move taken by the Fed amid slowing inflation. Of course, the magnitude of this rate cut is smaller than the 'initial cut' six weeks ago - the Fed then opted for a 50 basis point aggressive pace to kick off the first rate cut of this easing cycle.

In fact, interpreting this month's Fed monetary policy statement alone, the overall tone of the Fed still tends to be 'hawkish'. The most striking change in the statement is the removal of the phrase 'the Committee's confidence has strengthened that inflation will continue to rise to 2%'.

The latest statement states that the FOMC seeks to achieve full employment and a 2% inflation rate over an extended period, with a judgment that the risks to achieving employment and inflation goals are roughly balanced. With economic outlook uncertain, the FOMC remains alert to the risks facing its dual mandate.

Some industry insiders speculate that changes in the Fed's forward-looking inflation language may imply an open attitude towards pausing rate cuts in December. However, at the post-meeting press conference, Fed Chairman Powell sought to downplay this. Powell responded by saying that this does not imply a change in policy ahead. This sentence was added for the September rate cut (50 basis points). Leaving this sentence means providing new guidance to the market. The Fed hopes to maintain flexibility in its policy-making, rather than being constrained by its own expectations.

Powell said, "As the situation evolves, we will proceed cautiously to increase our chances of making the right decisions. We are trying to find a balance between acting too quickly and acting too slowly."

Regarding next month's rate meeting, Powell pointed out that it is too early to rule out any "possibilities" for the December meeting. He mentioned that slowing down rate cuts is "something we are just beginning to consider." "We are on the path to a more neutral stance. Since September, this has not changed at all. We just need to see where the data will lead us."

Powell also downplayed the impact of Trump's re-election on Fed policy in his speech. He said that it is too early to assert how the policies of the next administration will reshape the economic outlook. "We do not speculate, hypothesize, or assume which policies will be implemented. In the short term, the election will not affect our policy decisions."

As Powell's above statements still leave infinite possibilities for the December decision, from the perspective of the interest rate market's expectations, Thursday's Fed rate meeting did not actually have a significant impact on the pricing of the interest rate futures market.

The CME's FedWatch Tool shows that traders currently expect a 67.8% probability of a 25 basis point rate cut by the Fed in December, with a 32.2% probability of no change.

Diane Swonk, Chief Economist at Grant Thornton LLP, said the Fed may cut rates in December, but it appears they want to maintain "optionality" going forward. She pointed out that one of the main challenges the Fed faces now is "communication," as this is not a period where they can provide "a lot of forward guidance."

"Powell and his colleagues remind investors that the U.S. economic foundation remains solid," eToro U.S. investment analyst Bret Kenwell also stated, "Powell will not reveal whether the Fed will cut rates in December, which should not surprise investors. However, the Fed seems more confident in the labor market and the current U.S. economic backdrop than a few months ago."

Neil Dutta, Head of Economic Research at Renaissance Macro Research, believes that the Fed's latest statement did not make skipping a rate cut in December a primary consideration.

"We believe that Powell's remarks are overall dovish, as he has repeatedly hinted that a rate cut in December is still his basic judgment," Bank of America economist Aditya Bhave also stated. "Considering that the policy mix will not change for a period of time, we are still confident in our judgment of another 25 basis point rate cut in December."

Goldman Sachs Asset Management's Co-Head of Global Fixed Income and Liquidity Solutions, Whitney Watson, pointed out that with more inflation and employment data released, the Fed is expected to cut rates by 25 basis points as planned. We also anticipate a similar situation in December. However, stronger data and uncertainties in fiscal and trade policies mean that the Fed's risk of slowing down its easing pace may increase. In 2025, the term 'skip' may start to appear in our common vocabulary.

Editor/Somer