Alert: "Hawkish Rate Cut" Incoming, Market Beware of Disappointed Expectations

Tonight (Note: assuming the release is before the decision), all eyes are on Powell. A 25 basis point rate cut has become market consensus—the real storm lies in how he defines the "next step."

The current core scenario is a "Hawkish Cut." This means:

In action: Satisfy the market and execute the rate cut.

In words: Immediately pour cold water, downplay or even deny expectations of consecutive rate cuts in January next year.

Underlying pressure: Powell is leading the most divided Fed committee in recent years. He must use strong statements (a hawkish stance) to appease internal dissent and prevent the market from developing unrealistic expectations for easing.

Impact on the market: This could very likely lead to the classic "buy the rumor, sell the news" scenario. That is, after the rate cut is implemented, because future expectations are suppressed by "hawkish language," the market may instead take profits, resulting in volatility or a pullback. Traders need to beware of the risk that "the good news is fully priced in."
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