In September 2025, the Federal Reserve announced another 25-basis-point rate cut, adjusting the target range for the federal funds rate to 4.00%–4.25%. This marks the first move since December last year and brings the total cumulative rate cuts in this cycle to 125 basis points. The market had long anticipated this action, with interest rate futures before the FOMC meeting showing a nearly 90% probability of a cut. Despite this, U.S. President Donald Trump continued to frequently pressure the Fed on social media, demanding more aggressive easing policies, which has increased uncertainty about the future path of rate cuts.
In reality, this move is not only an adjustment to U.S. domestic financial policy but has also triggered a follow-on effect among global central banks. Central banks in countries such as Canada, the UAE, and Qatar announced rate cuts around the time of the Fed’s decision, suggesting that a new wave of global easing may be underway. The prevailing view within the industry is that the Fed is currently engaged in "preventive rate cuts" aimed at addressing multiple risks, including slowing employment, high inflation, and potential economic recession.
Market expectations for further rate cuts have significantly heated up. According to interest rate futures data, the probability of additional cuts in October and December has exceeded 90%. Some institutions even predict that the Fed may implement four consecutive 25-basis-point cuts by January next year, which could bring the rate range down to 3.375%, close to the neutral rate level.
In terms of asset performance, the rate cut quickly fueled market momentum: U.S. stocks saw short-term gains, Chinese assets remained strong, and the Hang Seng Tech Index performed particularly well. Gold prices hit a record high, while the U.S. dollar index fell sharply, and the 10-year Treasury yield dropped below 4%. Historical experience shows that preventive rate cuts tend to be more favorable for stock markets, with Hong Kong stocks particularly standing out for their resilience. Data from方正证券 (Founder Securities) indicates that, six months after a rate cut, Hong Kong stocks have averaged gains of over 30%, significantly outperforming major markets like U.S. and European stocks.
However, some institutions caution that the current market’s bets on easing may be overly optimistic. If inflation rises again or employment data reverses, a correction in easing expectations could lead to increased asset volatility. Meanwhile, the continued weakening of the U.S. dollar has driven passive appreciation of non-U.S. currencies such as the Chinese yuan, coupled with accelerated inflows of foreign capital. While the Chinese market may benefit in the short term, close attention must still be paid to economic fundamentals and policy signals in the future.
Overall, the Fed’s rate cut signals a renewed shift toward global monetary easing. Hong Kong stocks and emerging market assets are expected to see phased benefits, but amid heightened uncertainty, investors should remain cautious and flexibly respond to market fluctuations.
