50 basis points to start the interest rate cut cycle? The Fed has never done this before.

Inflation has cooled more than expected and Powell's dovish speech at the annual meeting of global central banks is superimposed. The market expects that the Federal Reserve will cut interest rates by nearly 100 basis points by the end of the year, which means that at least one of the next three interest rate meetings will cut interest rates by 50 basis points.

However, according to Deutsche Bank's latest research report, in the past three decades, the Fed has never started a new interest rate cut cycle with such a large rate cut.

Matthew Raakin, an analyst at Deutsche Bank, and others published a study earlier this week, saying that when the Fed adjusts interest rates, it usually takes a more cautious attitude at the FOMC regular meeting and generally does not cut interest rates significantly. On the contrary, sharp interest rate cuts usually occur in emergency meetings, or the Fed first holds an emergency meeting to discuss the necessity of sharp interest rate cuts, and then cuts interest rates at the following regular meeting.

The Deutsche Bank report mentioned that Powell confirmed the possibility of interest rate cuts in his speech at the annual meeting of global central banks in Jackson Hole, but did not provide specific guidance on the time and extent of interest rate cuts. Powell stressed that the decision to cut interest rates in the future will depend on "upcoming data, evolving economic prospects and risk balance".

Deutsche Bank believes that if the labor market remains stable, the Fed may choose to gradually cut interest rates by 25 basis points, and will not cut interest rates sharply at one time. However, if the labor market outlook deteriorates or there is downside risk to the economy, the Fed may take more radical measures to cut interest rates.

The report reminds that despite strong market expectations, the Fed's decision-making will be based on real-time assessment of economic data, rather than market wishful thinking.

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