Will the US dollar cut interest rates in November? If so, by how much?

A few days ago, we mentioned that the Federal Reserve is in a dilemma and is likely not to cut interest rates, at most by 25 basis points, which many people did not believe. Now the Federal Reserve itself has started to say so. What are they considering? This issue is somewhat complex.

On October 14th, Minneapolis Fed Chairman Kashkari participated in a discussion held by the Central Bank of Argentina and made a surprising statement: hinting that the US dollar will not cut interest rates in November.

He said that it seems appropriate to "further moderately adjust" the benchmark interest rate in the next few quarters.

On the same day, Federal Reserve Governor Waller also stated that interest rate cuts should be made cautiously at a prudent pace.

Their speeches have a common feature, almost every word is very restrained, careful, and the implied meaning is: there will be no 50 basis point cut like in September, nor will there be a rate cut at every interest rate meeting.

Currently, the market estimates that the probability of the Federal Reserve not cutting interest rates in November is about 18%.

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Why has the Federal Reserve suddenly turned? What has happened?

First, we need to understand why the Federal Reserve is said to be in a dilemma? Who is obstructing their interest rate cuts?This matter is somewhat complex, let's break it down step by step.

In simple terms, the Federal Reserve's most important mission when it comes to lowering interest rates is to control the pace of rate cuts and manage expectations to prevent the dollar from depreciating too quickly and capital from fleeing too rapidly. Otherwise, the U.S. stock market, bond market, and foreign exchange market, as well as small and medium-sized banks, would collapse due to excessive capital outflow, leading to a hard landing and inevitable economic recession in the United States.

However, the Federal Reserve has found that they are no longer in control. Despite repeated warnings from Powell and several high-ranking officials that there is no rush to lower interest rates, people no longer believe in this routine.

Why can't they control it? In fact, historically, they have never been able to control it every time interest rates are lowered, so almost every dollar rate cut has triggered an economic or financial crisis.