Analysis: If U.S. stocks experience increased volatility, it may force the Federal Reserve to cut interest rates

ChainCatcher News, according to a Reuters columnist, if concerns about excessive optimism regarding artificial intelligence continue to escalate, causing recent market volatility to evolve into more severe turbulence, then the financial stability risks triggered by a sharp drop in asset prices could force the Federal Reserve to cut interest rates. Of course, this is not the baseline scenario. Traditionally, unless liquidity dries up or market functioning is impaired, the Federal Reserve does not intervene to calm the markets. Although market sentiment and performance have clearly deteriorated, a crisis is still far off at present, especially after last Friday's rebound.

However, this time, the Federal Reserve may not need to wait until the situation deteriorates to that extent before taking action. The reason is that, according to calculations by many economists—and even some policymakers admit—the health of the current "real economy" is more dependent on Wall Street's wealth than ever before.