The Federal Reserve delivered its third consecutive rate cut yesterday, but the reaction in global markets has been a “tale of two cities.” While Wall Street celebrated, Asia-Pacific markets couldn’t hold onto their early optimism.

The “Hat-Trick” is Complete: As expected, the Fed cut rates by 25 basis points (bringing the target to 3.5%-3.75%). However, Chair Powell signaled a pause, stating the Fed is now “well-positioned to wait and see,” effectively pumping the brakes on future aggressive cuts.

Asia Reverses Course: Despite a strong lead from the US (where the Dow jumped 1.1%), Asian markets gave up early gains to close mostly lower. Japan’s Nikkei 225 dropped nearly 1%, and South Korea’s Kospi dipped, reflecting caution over the Fed’s “wait and see” stance.

The “Stealth” Liquidity Boost: Beyond the rate cut, the Fed announced it would resume buying $40 billion in Treasury bills starting Friday. This is a significant move to inject liquidity and support market functioning, which helped push short-term yields lower.

The Tariff Warning: Jerome Powell explicitly noted that President Trump’s tariffs have fueled inflation. This comment likely weighed on Asian markets, which are sensitive to US trade policy and inflation shocks.

Dollar Dives: The US Dollar Index fell to its weakest level since October, reacting to the combination of the rate cut and the new balance sheet expansion.