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After crossing the high interest rate hill, people are encountering a different interest rate cut cycle.

On the evening of the 23rd, Beijing time, Federal Reserve Chairman Powell sent a clear signal of interest rate cuts at the Jackson Hole Global Central Bank Annual Meeting: "The time for policy adjustment has come. The timing and pace of interest rate cuts will depend on subsequent data, changes in the outlook and the balance of risks."

The market used the word "dovish" to describe the Fed Chairman's speech, and outlined the number of interest rate cuts this year, with three rate cuts becoming the most welcome expression; the risk appetite of some investors in the market is gearing up, giving rise to expectations for chasing high returns.

After the rapid interest rate hikes from 2022 to 2023 and the long-term high interest rate stance, high inflation has finally been temporarily tamed, and the 2% inflation target is clearly visible. The Federal Reserve can finally breathe a sigh of relief and carefully tilt the policy balance to take care of the current labor market, which has cooled down a lot.

Whether the Fed's interest rate cut will be smooth sailing or full of twists and turns is not very meaningful, because if the directional change can still find consensus factors in the market, then the actual operation will be more subjective and individual. However, identifying the logical reasoning behind the start of this interest rate cut cycle will help avoid getting lost in the market.

This interest rate cut cycle is different from the past. The US economy is still on the left side of the economic cycle, rather than the traditional interest rate cut cycle that is concentrated on the right side of the top of the economic cycle. Judging from indicators such as the 4.2% unemployment rate, 4.9% job vacancy rate, 62.7% labor force participation rate and 2.9% inflation rate, the US economy is still in the climbing and expansion period, not the downhill zone. This shows that the current interest rate cut cycle that the Federal Reserve is preparing to launch is not to manage the economic downturn or downhill risks in the traditional sense, but to fine-tune the economic uphill.