According to the Wise Finance APP, Mary Daly, President of the San Francisco Fed, said on Monday that she expects the Fed to continue cutting interest rates as inflation continues to cool down to prevent further weakening of the U.S. labor market. In contrast, other Fed officials speaking on Monday generally expressed their support for slowing down the rate of Fed rate cuts rather than continuing the abnormal pace of up to 50 basis points in September, stating that it should not be mechanically announced to cut rates at every rate meeting, and it may be necessary to appropriately "pause rate cuts".

Since October, several Fed officials have expressed support for a "gradual rate-cutting process" rather than the unconventional pace of 50 basis points, advocating for making rate-cutting decisions based on data rather than mechanically announcing rate cuts at every FOMC rate meeting. These officials' recent viewpoints have been described as a "hawkish rate cut," maintaining the overall direction of gradual rate cuts, but the specific pace and steps of rate cuts are not fixed, and even on the path of rate cuts, they may choose to press the "pause button" to observe the trend of economic data. It is worth noting that this week is the final opportunity for Fed officials to publicly express their views before the silent period of the November rate decision.

This push for rate cuts while maintaining a hawkish stance has cooled market expectations for Fed rate cuts for the remainder of this year and next year, driving U.S. bond yields, especially long-term bond yields of 10 years and above. The 10-year U.S. bond yield, known as the "anchor of global asset pricing," has been rising since October and is currently hovering near its high point since July, closing at 4.20% on Monday.

According to analysts from JPMorgan on Wall Street, as the U.S. bond yield curve continues to steepen, long-term bond yields are likely to rise further. It is understood that Arif Husain, Chief Investment Officer of the Fixed Income Department at U.S. asset management company T. Rowe Price, stated, "In the next six months, the 10-year U.S. bond yield will test the key threshold of 5%, and the U.S. bond yield curve will become steeper."

If Arif Husain's forecast proves to be correct, the global financial markets will face a turbulent "repricing wave." This also highlights that after unexpectedly strong economic data raised doubts about the Fed's potential slowdown in rate cuts, strategists have become increasingly divided on the outlook for the world's largest bond market. This contrasts sharply with expectations for a decline in U.S. bond yields after the Fed cut rates last month. Bond traders currently generally expect the 10-year U.S. bond yield to fall to 3.67% by the second quarter of next year.

From a theoretical perspective, the 10-year US Treasury yield is equivalent to the risk-free interest rate indicator r at the denominator end of the important valuation model in the stock market - the DCF valuation model. When other indicators (especially cash flow expectations at the numerator end) have not changed significantly, even in the case where the numerator side of the earnings per share for the opening of the US stock earnings season in October may be biased towards lower expectations, if the denominator level is higher or continues to operate at historically high levels, the valuation of risk assets such as US technology stocks, high-risk corporate bonds, and cryptocurrencies facing contraction at historically high valuations.

Traders have begun pricing in the Federal Reserve's "pause in rate cuts".

Data from the swap trading market currently shows that traders are betting that the Federal Reserve will cut rates by 21 basis points at the November meeting, with rate cuts of 39 basis points in the last two meetings of the year. This latest pricing indicates that some traders believe that there is a high probability that the Federal Reserve will announce a "pause in rate cuts" at one of the meetings. especially after the strong September non-farm payroll data and better-than-expected retail sales growth in the US, the fundamental outlook for the US economy seems much stronger than most economists anticipated, and the hawkish view of a "pause in rate cuts" is gaining increasingly more support.

Compared to the more hawkish stance of other Federal Reserve officials, Daly's attitude appears relatively moderate. "So far, I haven't seen any information to suggest that we won't continue to lower interest rates," Daly said at a meeting on Monday. "For an economy close to a 2% inflation rate, these interest rates are very tight, and I don't want to see any deterioration in the labor market.

Federal Reserve officials began an interest rate cut cycle at the FOMC meeting last month, the first rate cut since the outbreak of the COVID-19 pandemic. Concerned about the deterioration of the labor market and inflation being very close to the Fed's target anchor of 2% inflation, the Fed unexpectedly cut the benchmark rate by 50 basis points in September to a range of 4.75% to 5%.

However, economic data since then shows that non-farm payroll and business hiring have been much better in recent months than initially reported, and the month-on-month growth in retail sales continues to show resilience, all of which imply that consumer spending, crucial for the US economy, remains very healthy. Market participants now generally expect the Fed to announce a 25 basis point rate cut at the rate meeting on November 6-7, but as priced in by the swap market, some traders are betting that the Fed will hit the "pause button" on the rate cut next month.

"We will continue to adjust policies to ensure that they align with our economy and its evolving needs," Daly stated. However, being more dovish in her stance, she did not comment on the pace and speed of future rate cuts by the Fed. She had publicly supported the decision to cut rates by 50 basis points in September, and even stated that in her view, a 50 basis point rate cut remains one of the options for the next meeting.

The majority of the Federal Reserve officials lean towards a hawkish stance.

Earlier on Monday, Federal Reserve officials speaking on other occasions generally indicated their support for a slower rate cut than the 50 basis points cut in September, and hinted at the stance of the Fed "pausing rate cuts" beneath strong economic data.

According to sources, Torsten Slok, Chief Economist at Apollo Global Management, recently publicly stated that with the strong growth of the US economy and the continued hot job market, the likelihood of Fed officials keeping rates unchanged in November is increasing.

Slok believes that there are many reasons for the strong US economy. The dovish Fed, continuously rising stock and housing prices, narrow credit spreads, and "broadly open" corporate financing in both public and private markets are just some factors. Slok’s hawkish views appear to be gaining the trust of Wall Street and Fed officials.

Compared to Daly’s conservative views, most of the recent views of Fed officials on rate cuts appear quite hawkish. Dallas Fed President Kaplan stated that in highly uncertain economic conditions, officials should act cautiously and believes that "gradually lowering policy rates to a more normal or neutral level helps manage risks and achieve our goals".

Minneapolis Fed President Kashkari stated that he "expects more moderate rate cuts over the next few quarters to achieve the Fed's neutral rate target". Kansas City Fed President Schmidty expressed his strong desire to "avoid large moves, especially given the huge uncertainty about the ultimate policy goals", indicating his inclination towards a cautious and gradual policy approach, and determining the need for further rate cuts based on economic data.

Schmidt, a voting member of the FOMC for the Fed in 2025, so his views are considered crucial for the Fed's pace of rate cuts and specific path. Schmidt predicts that the future Fed benchmark interest rate level will be significantly higher than the average level of the past ten years before the outbreak of the pandemic. This expected growth may be driven by productivity improvements, increased investments, and accumulated government debt.