News - How will the Federal Reserve's 25 basis point interest rate cut, nine months later, impact the global steel market?

On September 18, the Federal Reserve announced its first interest rate cut since 2025. The Federal Open Market Committee (FOMC) decided to cut interest rates by 25 basis points, lowering the target range for the federal funds rate to between 4% and 4.25%. This decision was in line with market expectations. This marked the first time the Fed has cut interest rates in nine months since December of last year. Between September and December of last year, the Fed cut interest rates by a total of 100 basis points across three meetings, and then held rates steady for five consecutive meetings.

Federal Reserve Chairman Powell stated at a press conference that this rate cut was a risk management decision and that a rapid adjustment of interest rates was unnecessary. This suggests that the Fed will not enter a sustained cycle of rate cuts, cooling market sentiment.

Analysts point out that the Fed's 25 basis point rate cut can be considered a "preventive" cut, meaning it releases more liquidity to stimulate economic activity, support the job market, and prevent the risk of a hard landing for the US economy.

The market expects the Federal Reserve to continue cutting interest rates this year.

Compared to the rate cut itself, the subsequent policy signals conveyed by the Federal Reserve's September meeting are more important, and the market is paying closer attention to the pace of future Fed rate cuts.

Analysts point out that the impact of tariffs on US inflation will peak in the fourth quarter. Furthermore, the US labor market remains weak, with the unemployment rate expected to continue climbing to 4.5%. If the October non-farm payroll data continues to fall below 100,000, a further rate cut in December is highly likely. Therefore, the Fed is expected to cut interest rates by 25 basis points in October and December, bringing the total to 75 basis points, three times for the year.

Today, China's steel futures market saw more gains than losses, with average spot market prices rising across the board. This includes rebar, H-beams, steel coils, steel strips, steel pipes and steel plate.

Based on the above perspectives, Royal Steel Group advises clients:

1. Immediately lock in short-term order prices: Take advantage of the window when the current exchange rate hasn't fully reflected the expected rate cut and sign fixed-price contracts with suppliers. Locking in current prices avoids increased procurement costs due to exchange rate fluctuations later.

2. Monitor the pace of subsequent interest rate cuts: The Fed's dot plot suggests another 50 basis point rate cut before the end of 2025. If US employment data continues to deteriorate, this could trigger unexpected rate cuts, exacerbating pressure on the RMB to appreciate. Clients are advised to closely monitor the CME Fed Watch tool and adjust purchase plans dynamically.