Powell's dovish remarks reignite rate cut expectations

On Monday, Federal Reserve Chair Jerome Powell's comments reignited market expectations for a rate cut. He clearly stated that current Fed policy is in a "safe zone," inflation expectations are stable, and there is no urgency for further tightening. Following this statement, expectations for rate hikes quickly faded, the dollar index retreated, and U.S. Treasury yields declined. Meanwhile, risk assets experienced a long-awaited rebound — the crypto market, after weeks of silence, also reignited bullish enthusiasm.

This time, the market chooses to believe Powell, not because his words are more persuasive than before, but because the background has fundamentally changed. Inflation data has been below expectations for three consecutive months, with February's core PCE year-over-year growth slowing to 2.8%, gradually easing concerns about persistent inflation; the labor market is also cooling modestly, with slower non-farm job gains and steady wage growth, and service sector employment demand is no longer as tight as earlier in the year. Coupled with the political realities of an election year, historical experience suggests that the Fed tends to prefer stability over creating turbulence. The combination of these three factors convinces the market: the rate hike cycle has come to an end, and a rate cut is only a matter of time — not whether it will happen.

As expectations shift from "whether" to "when" for rate cuts, funds begin to position in advance. The downward trend of the dollar index is further confirmed, and falling U.S. Treasury yields support the bond market. Gold, as the most direct beneficiary of rate cuts, benefits from declining real interest rates, reducing the opportunity cost of holding gold, and gold prices are approaching historical highs again. Equities and cryptocurrencies benefit more from improved liquidity expectations and risk appetite — with the Nasdaq leading U.S. stocks higher, and the crypto market also showing signs of capital inflow.

However, the rekindling of rate cut expectations does not mean all assets will perform strongly. Markets often jump the gun before expectations are realized, and after expectations are fulfilled, there can be a "buy the rumor, sell the fact" correction. For the crypto market, while improved macro liquidity is positive, the sustainability of the rebound still depends on internal liquidity conditions — whether ETF funds can continue flowing in, and whether on-chain activity can pick up — these are key variables determining how far this rebound can go. In the short term, the rebound driven by emotional recovery has opened a window, but in the medium term, caution is needed against profit-taking pressures after the good news is exhausted.

Overall, Powell's dovish stance this time essentially confirms a turning point for the market: the tightening cycle is over, and easing expectations are on the way. For investors, the question is no longer "Will there be a rate cut?" but "How much will the market price in before the rate cut actually happens?" This window may be the perfect time to reassess positions and plan for the next phase of opportunities.