Recently, Fed Chairman Powell delivered a speech, suggesting that the current high interest rate levels may need adjustment. This statement immediately triggered a strong market reaction, with investors generally expecting a 25 basis point rate cut from the Fed in September, with the expected probability soaring from the previous 74.8% to 91.1%, almost becoming a certainty.

There are two main reasons behind the expectation of interest rate cuts: First, there are signs of weakness in the U.S. job market, and failing to cut interest rates in a timely manner could lead to a further deterioration of employment conditions. Second, the inflation concerns that arose from the previous tariff increases have eased, making it unlikely that rate cuts will trigger a significant rise in prices.

Market expectations for interest rate cuts are not limited to September, with the probability of continued cuts in October also approaching 50%. There is even a 37% chance that there may be three rate cuts by 2025, each by 25 basis points.

This policy shift may have various impacts on the general public:

1. The stock market may experience an upward trend due to increased liquidity.
2. Bond yields may decline.
3. The purchasing power of the dollar may temporarily weaken.

Overall, the Fed seems to be preparing to stimulate the economy through interest rate cuts. A rate cut in September is almost a foregone conclusion, and the extent of subsequent cuts will depend on the performance of employment and price data. This signifies that the Fed may be shifting from a tightening policy to an easing policy in response to current economic challenges.