#鲍威尔鸽派发言重燃降息预期 From rate hike anxiety to rate cut expectations — global funds are undergoing a crucial turnaround

On Wall Street this Monday, a shift occurred that caught many traders off guard. Just a few days ago, the market was preparing for a "rate hike by the Federal Reserve before the end of the year," but overnight, the sentiment changed — traders began repricing the possibility of a rate cut, causing short-term U.S. Treasury yields to plummet. Is this market madness, or have the big financial players finally understood the current economic reality?
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1. Macro Logic: Why did Powell’s remarks trigger a "sudden brake" in the market?
This dramatic reversal in market expectations was directly triggered by the latest statement from Federal Reserve Chair Jerome Powell. In response to the energy shock caused by the U.S.-Iran conflict, Powell clearly stated that the Fed is inclined to keep interest rates unchanged and will "temporarily ignore" the impact of this shock. On the surface, this appears to be an official stance of "waiting and seeing," but the underlying policy philosophy points to a key judgment — "Supply-side shocks should not be addressed with monetary policy."
From an economic principle perspective, Powell’s logic is very clear. Rising oil prices push up inflation, not because of excessive demand, but due to supply disruptions caused by war. If the Fed raises rates in response, it’s akin to using a "fever reducer" to treat a supply chain injury. The result would only worsen the economic downturn and fail to reopen the Strait of Hormuz for oil flow.
Based on this judgment, the market overnight shifted from "worried about runaway inflation" to "worried about economic recession." A strategist at a French foreign trade bank bluntly said that investors’ focus has shifted from "inflation caused by rising oil prices" to "how high oil prices will impact the U.S. economy." When recession becomes the main concern, rate hikes are no longer an option, and rate cuts are back on the table.
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2. Market signals: Within a week, rate hike is certain → 20% chance of rate cut
Market expectations have completed a 180-degree turnaround in just one week — at the start of last week, futures markets still priced in a 100% chance of a rate hike before the end of the year, and even last Friday, a rate hike was considered highly likely; but by Monday, traders were already pricing in a 20% chance of a rate cut before year-end. U.S. Treasury yields fell sharply, with the 2-year yield dropping over 8 basis points and the 10-year yield nearly 8 basis points.
"Sentiment shifted directly from extreme hawkishness to dovish expectations — such a sharp turn is rare in the past decade." Behind this is a fundamental disagreement in how the market is pricing the Federal Reserve’s policy path.
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3. Historical comparison: What the 1990 oil crisis taught the market
Goldman Sachs, in its latest research report, directly rebutted the current market rate hike bets by referencing the historical experience of the 1990 oil crisis. At that time, oil prices surged sharply, bond yields soared, and the market was frantically betting on Fed rate hikes, only for the Fed to cut rates after the economic situation worsened.
Goldman Sachs’s core conclusion is simple: the market overreacted to the oil shock. The baseline view remains that the Fed will cut rates twice in 2026; the likelihood of a rate cut this year is high, just delayed in timing, not reversed in direction.
Interestingly, the background of 1990 bears a striking resemblance to today: supply-side driven oil shocks, with the U.S. economy in a slowdown. Goldman Sachs has raised the probability of a U.S. recession from 20% to 30%. Historically, environments close to recession are not the stage for Fed rate hikes.