#BTC

Volcker's current (October 14th) speech: It may not be as urgent to address the issue of subsequent interest rate cuts as it was last month, and the policy can be shifted to a neutral stance in a cautious manner. The latest higher-than-expected inflation data is "disappointing." Volcker's speech on September 5th: He is open to the possibility of a larger rate cut and will propose this view at the appropriate time. The balance of risks has shifted to the employment side of our dual mandate, and policy needs to be adjusted accordingly. Kashkari's current (October 14th) speech: A "further moderate" rate cut may be appropriate in the coming quarters. The labor market remains strong, and the recent employment report is "encouraging, indicating that rapid labor weakening does not seem imminent. The inflation rate has fallen sharply from its peak but remains slightly above our target. Kashkari's speech on October 7th: The balance of risks has shifted from inflation to unemployment, and we are very confident that inflation should fall back to the 2% target level. In their last speeches, both seemed unconcerned about inflation and saw problems in the labor market, suggesting a "precautionary rate cut" (a significant rate cut without evidence of an economic slowdown and entry into recession). Now the situation is completely reversed, with both expressing concerns about inflation and beginning to favor the job market, suggesting a "cautious rate cut." What they are now implying is not just a "pause in rate cuts" in November, but that there should be a "slow rate cut" before the "last cut". Recent economic indicators have improved, and with CPI higher than expected, some people believe that the Fed's decision to cut rates by 50 basis points in September was a mistake. This is the opening of the week, and if more officials express such views in the future, the market will reprice the previously "unpriced" dollar strength. As there is still some time before the Fed's November meeting, the current stage should be a phase of free expression by Fed officials, aimed at allowing the market to digest various possibilities. The timing chosen by the Fed is very good, as it is a stage where the market lacks speculative themes, so as not to trigger an excessive reaction in the market. However, the reason why the market remains relatively calm is that only a few people feel that changes are taking place, and when most people realize it, the change has already occurred. Currently, the market expects a probability of around 18% that the Fed will not cut rates at the November meeting, reflecting a 42 basis point cut in the remaining two meetings this year (45 basis points last Friday).