Will the Federal Reserve lower interest rates? It seems too early to say!!
Seeing negative growth in the US GDP, many people's first reaction is: "The economy is going to collapse, the Federal Reserve should lower interest rates to save the market, right?"
But the truth might be exactly the opposite—this data actually gives the Federal Reserve a reason to "continue to hold firm."
Why is the Federal Reserve not in a hurry even though GDP has fallen?
Import surge is to blame: The main reason for this GDP decline is the widening trade deficit, while domestic consumption and business investment are still growing, indicating that the economic foundation is not collapsing.
Inflation remains the number one enemy: Although CPI has slowed down, core PCE remains high, and lowering interest rates now would mean throwing away previous efforts.
The market has already "laid flat": CME interest rate futures show that the probability of a rate cut in June is only 36%, lower than before the data was released.
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