In the middle of last month, the Federal Reserve announced a cut of 50 basis points in the federal funds rate, marking the United States' official entry into a monetary easing cycle. At the monetary policy meeting at that time, 11 out of the 12 Federal Reserve officials with voting rights voted for a 0.5% rate cut, with only one official supporting a 25 basis point cut. The market predicted that at the next FOMC meeting in November, the Federal Reserve is highly likely to cut rates by another 50 basis points and has a small probability of cutting by 25 basis points.

As time goes by, this expectation has undergone a dramatic change.

First, the job market has heated up again. The non-farm employment data for September, released a few days ago, revealed that the month saw an addition of 254,000 jobs, far exceeding the expected 140,000; at the same time, the unemployment rate was 4.1%, also better than the expected 4.2%.

The favorable employment situation indicates that the U.S. economy has not fallen into a recession and can continue to maintain a high-interest-rate environment, without the need to hastily reduce the federal funds rate. At this point, cutting rates by another 50 basis points is no longer the first choice for the Federal Reserve.

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On the evening of October 10th, the price data released by the United States deepened this expectation. The U.S. CPI rose by 2.4% year-on-year in September, although lower than the previous value of 2.5%, it was 0.1 percentage points higher than the market's expected 2.3%; the month-on-month growth rate was 0.2%, also 0.1% higher than expected.

The core CPI, which excludes food and energy prices, rose by 3.3% year-on-year in September, even higher than the previous month's data, indicating that the U.S. core inflation has been below expectations for two consecutive months.

After the release of the September price data, the CME FedWatch tool showed that the estimated probability of the United States not cutting rates in November was 15%, and the probability of cutting rates by 25 basis points was 85%.

In the past few weeks, the market had been confident that the Federal Reserve would proceed with rate cuts at a pace of 50 basis points in the future. Two significant data releases, especially the September CPI, dispelled such expectations, and the argument for another 0.5% cut in November was completely extinguished.

According to the minutes of the Federal Reserve's September interest rate meeting released earlier, the reason the Federal Reserve chose a 50 basis point cut for the first time was based on the achievements made in curbing domestic inflation over the past two years, and considering the balance between the cooling labor market and inflation risks.

The United States has slowed the pace of rate cuts, with a 50 basis point cut becoming an illusion. The next likely move is a 25 basis point cut, and in extreme cases, no rate cut at all. This is definitely not good news for the global capital markets.The most critical factor determining the rise and fall of asset prices in the short term is liquidity; the more money in the market, the faster asset prices rise. As the "global central bank," the Federal Reserve slows down its "money printing" pace, leaving a portion of hot money to remain within the U.S. banking system, unable to flow to the global market to support the rise in asset prices.