Analysis: If volatility in the US stock market intensifies, it may force the Federal Reserve to cut interest rates

Reuters columnists point out that if concerns about excessive optimism regarding artificial intelligence continue to fester, leading recent market fluctuations to evolve into more severe turbulence, the financial stability risks triggered by a sharp decline in asset prices may force the Federal Reserve to cut interest rates. Of course, this is not the baseline scenario. Traditionally, the Federal Reserve does not intervene to soothe the market unless there is a liquidity crisis or a breakdown in market functionality. Although market sentiment and performance have clearly deteriorated, we are still far from a crisis, especially after last Friday's rebound.

However, this time, the Federal Reserve may not need to wait for the situation to worsen to that extent before taking action. The reason is that, according to many economists' calculations, and even some decision-makers admit, the current health of the "real economy" is more dependent on Wall Street's wealth than ever before. (Jin Shi)