The Federal Reserve announced a sharp 50 basis point cut in interest rates in its September interest rate decision, and described this rate cut as triggering a sharp rise in the stock market after a “recalibration” of its monetary policy, while the “recession” dwarfed the “recession.”

The Zhitong Finance App learned that on Thursday, the US stock market rose strongly. The Dow Jones Industrial Average broke through the 42,000 mark for the first time, an increase of 1.26%, and the S&P 500 index also rose 1.70% to a record high.

Powell explained at a press conference on Wednesday: “We know now is the time to recalibrate our policies to make them more in line with the current situation. The risk balance has become more balanced, considering that inflation and employment levels are moving towards more sustainable levels.” Although the stock market retreated after Powell's speech on Wednesday, the market quickly rebounded on Thursday.

The Federal Reserve's decision drew the attention of analysts and commentators, and “recalibration” became the focus. Many analysts believe that this shift to neutrality was the main driving force behind the rise in global stock markets on Thursday.

Fundstrat Research's Washington policy strategist L. Thomas Block pointed out that Powell's “recalibration” seemed to be the key word of the day.

Despite the pessimistic views of some market participants after Powell's press conference on Wednesday, the Federal Reserve Chairman's policy shift encouraged the bulls. Jose Torres, senior economist at Interactive Brokers, said in a report that since the global financial crisis, the Federal Reserve has undoubtedly been a “staunch ally” for many investors, stabilizing financial market fluctuations through its information transmission and driving asset prices (such as housing, stocks, and bonds) to rise further.

Jim Baird, chief investment officer of Plante Moran Financial Advisors, commented in an email that Powell's wording and tone emphasized that the decision reflected the Fed's reassessment of the economic situation. This is also reflected in the Federal Reserve's updated economic forecast. Inflation is falling faster than expected, and the unemployment rate is rising more than the Fed's expectations in June.

Baird added: “Whether the Federal Reserve can seize the timing and successfully implement policies is still unknown, but the signals conveyed by policy makers indicate that the path of interest rates is not set in stone, which is an important signal for the market.”

Nicholas Colas, co-founder of DataTrek Research, said that Powell mentioned the term “recalibration” many times in his speech on the same day and successfully conveyed a reasonable view to investors that this sharp interest rate cut was an adjustment in the cycle rather than a precursor to a recession.

Colas further wrote, “The 'slow and steady' pace of interest rate cuts conveyed by Powell may disappoint some people, but this dispels concerns that the 50 basis point rate cut only applies to rapid economic deterioration. From that perspective, he met his expectations during Wednesday's press conference.”

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