The Federal Reserve, also known as the Fed, implemented its first interest rate cut in over four years on the 18th.

This shift in its monetary policy could have spillover effects, potentially leading to more aggressive efforts and pacing in the implementation of loose monetary policies by several countries.

The Fed cut interest rates by 50 basis points, announcing on the 18th that it would lower the target range for the federal funds rate by 50 basis points, bringing it down to between 4.75% and 5.00%.

This is the Fed's first rate cut since March 2020 and marks a shift from a tightening to an easing cycle in U.S. monetary policy.

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The Fed concluded its two-day monetary policy meeting on the same day.

The Federal Open Market Committee (FOMC), the Fed's decision-making body, issued a statement after the meeting saying that it had "greater confidence" that the inflation rate would sustainably move towards the 2% target and believed that the risks to achieving full employment and price stability were roughly balanced.

In a press conference following the meeting, Fed Chairman Powell described the 50 basis point cut as a "strong action," and also stated that the FOMC did not think the rate cut was late, but rather timely.

Powell pointed out that the personal consumption expenditure price index had fallen from a high of around 7% to 2.2% in August, indicating that inflation had "significantly eased."

The Fed's latest economic outlook released that day showed that Fed officials' median forecast for the personal consumption expenditure price index at the end of this year was reduced to 2.3%, lower than the 2.6% in June.

Alongside the decline in inflation, there have been some signs of weakness in the U.S. job market.

Powell said that the average monthly job growth over the past three months was 116,000, significantly lower than earlier this year.

At the same time, the unemployment rate rose to 4.2%.

According to the latest economic outlook, Fed officials' median forecast for the unemployment rate at the end of this year is 4.4%, higher than the 4.0% in June, indicating that labor market conditions are not as expected.

In addition, the economic outlook survey shows that 19 members of the FOMC expect the Fed to cut rates further before the end of this year, with 9 expecting a 50 basis point cut and 7 expecting a 25 basis point cut.

Former Trump advisor Anthony Scaramucci said that the Fed would cut rates at least twice more before the end of the year.

He warned that if the Fed does not act quickly enough, the U.S. could face the risk of an economic recession.

He predicted that if the Fed takes significant and deep rate cuts in the next six months, it might be able to avoid a recession.

Developed economies are poised to act.

After the Fed announced the rate cut, the subsequent spillover effects are closely watched.

The possibility of developed economies such as the UK, the Eurozone, and Canada continuing to lower interest rates within the year has increased.

Australia, which has not yet cut rates, also has the possibility of easing its monetary policy in the future.

The latest interest rate decision announced by the Bank of England on the 19th showed that the interest rate was maintained at 5%.

Although this interest rate meeting did not take action, the market expects that easing inflationary pressures will support the Bank of England to further cut rates within the year, most likely in November and December, and to cut rates several times more by 2025.

The UK's inflation rate in August remained slightly above the Bank of England's 2% target, leaving room for further rate cuts by the Bank of England later this year.

Data released by the UK's Office for National Statistics on the 18th showed that the UK's CPI rose 2.2% year-on-year in August, unchanged from the previous value and lower than the Bank of England's expectation.

The data showed that upward pressure from air ticket prices was offset by the downward trend in automotive fuel.

These data may keep the Bank of England on track to further relax its monetary policy later this year.

The Bank of England cut rates by 25 basis points on August 1st, the first rate cut since early 2020, citing easing underlying inflation as the reason.

In addition, the key indicator closely watched by the Bank of England, the August service sector CPI, rose 5.6% year-on-year, higher than the market's general expectation of 5.5% and the previous value of 5.2%.

However, the market generally expects this rebound to be temporary.

The Reserve Bank of Australia is also under pressure to cut rates.

Since May 2022, Australia's interest rates have jumped from a record low of 0.1% to a 13-year high of 4.35% after 12 rate hikes.

This move has significantly slowed down inflation and economic growth.

However, Reserve Bank of Australia Governor Michelle Bullock said that although inflation has fallen, it is still at a relatively high level, so interest rates need to remain high to curb spending.

However, some market participants predict that the Reserve Bank of Australia may ease its monetary policy and cut rates in November.

The European Central Bank just announced this month that it would cut the deposit facility rate by 25 basis points to 3.50%.

This is the second rate cut by the bank since it announced a rate cut in June this year.

Analysts pointed out that the bleak economic outlook and the start of the Fed's rate cut cycle may lead the European Central Bank to accelerate its rate cuts.

The Bank of Canada, which has already cut rates three times this year, is also facing a similar path.

Against the backdrop of slowing inflation and sluggish economic growth, the external impact of the Fed has increased the possibility of a significant rate cut in October.

Many Asian countries are entering a rate-cutting cycle.

Southeast Asian countries that are greatly affected by the potential spillover effects of the Fed's rate cuts are entering a rate-cutting track.

Japan, which is taking the opposite monetary policy path, may face market turmoil.

The Central Bank of Indonesia announced on the 18th that it decided to cut the benchmark interest rate by 25 basis points to 6%, and at the same time, it cut the deposit rate to 5.25% and the lending rate to 6.75%.

This is also the first rate cut in Indonesia since February 2021.

From August 2022 to April 2024, the Bank of Indonesia raised the benchmark interest rate by 275 basis points from 3.50% to 6.25%, and kept the interest rate unchanged in May, June, July, and August 2024.

Bank of Indonesia Governor Perry Warjiyo said at a press conference that this move is in line with the country's low inflation forecast for 2024 and 2025, and the inflation rate remains within the target range of 2.5%.

The policy is also aimed at supporting a stronger Indonesian rupiah and promoting economic growth.

Due to the potential spillover effects of the Fed's rate cuts, he specifically predicted, "Our latest assessment believes that the Fed will cut rates three times this year (25 basis points in September, November, and December), and four times in 2025."

DBS Bank economists predict that due to the recent appreciation of the Indonesian rupiah, which has provided the Bank of Indonesia with room to start an easing cycle in advance, the Bank of Indonesia will cut rates once more before the end of the year.

Since the third quarter, the Indonesian rupiah has appreciated nearly 7% against the U.S. dollar, approaching its highest level in a year.

Many central banks in Southeast Asia are at the beginning of a rate-cutting cycle, and the Philippines has already eased its monetary policy in August this year.

The actual interest rates (borrowing costs adjusted for inflation) in the region are at a historical high, creating additional space for easing policies.

Thai government officials recently called on the central bank to reduce borrowing costs, continuing the months-long disagreement between the government and the central bank on interest rate setting.

Former Thai Prime Minister Satha's main advisor, Pichai, recently publicly criticized the Bank of Thailand's ideas as outdated and too slow, emphasizing that the central bank should help the country promote growth.

He said that the strong baht has already hurt exporters, and exports are expected to grow only slightly this year, and believes that the central bank should take action and should help improve the liquidity of the financial market.

The baht's exchange rate against the U.S. dollar has reached its highest level in more than 18 months.

Moody's Analytics and other institutions have pointed out that the Bank of Thailand may cut rates in 2024.

They said that Thailand's relatively high interest rate environment has weakened private consumption, consumer prices remain moderate, and coupled with the gradual appreciation of the baht, these factors have increased the possibility of rate cuts within the year.

Some analyses pointed out that the Fed's rate cuts will make Japanese market investors nervous.

If the Fed chooses to cut rates more significantly, the yen may strengthen further, putting pressure on Japanese companies that rely on exports.

The yen carry trade unwinding caused by Japan's recent interest rate hikes once dominated market sentiment, causing the Nikkei 225 index to suffer the most severe plunge since 1987.

The increasing divergence between Japanese and U.S. monetary policies may intensify market volatility risks.