Tonight at 2:00 AM, Powell will speak again, so let's briefly discuss the Federal Reserve's rate cut process before he comes out.

We know that there will definitely be no rate cut in May; this is a consensus. The question is whether there will be a cut in June, so everyone is waiting to hear Powell's tone tomorrow, whether it leans hawkish or dovish.

To conclude: I personally believe that the Federal Reserve will not cut rates in June; the earliest should be in July.

Let's break it down into a few points.

The first point is the uncertainty of the White House's policies.

The function of the Federal Reserve is to provide a certain monetary policy, while the uncertainty brought by the ‘understanding king’ conflicts with the function of the Federal Reserve.

And if you want Powell to take the blame for the ‘understanding king’, that is impossible; he will definitely not pay for the mistakes of the executive branch. Powell has also made it clear that he will not bear the costs of the White House’s policies. Therefore, I believe Powell will not rush to cut rates, especially when the policy outlook is unclear.

Powell needs to wait; he needs to see the actual implementation of the 90-day tariff pause, he needs to observe the negotiations between China and the U.S., and assess the true impact of tariffs on prices.

The second point is the most fundamental one, which is still the issue of inflation.

Fundamentally speaking, Powell is worried about the Federal Reserve repeating the mistakes of the 1970s. Especially because during the pandemic, his famous statement that ‘inflation is temporary’ severely misjudged the trend of prices, leading him.

Now the fear is even greater, worried about repeating past mistakes.

Currently, inflation is around 2.4%, which is considered a successful reduction from around 7%. However, now that it has come down, he is very afraid of inflation rebounding because if it does, it won't be something that can be resolved in six months or a year.

Hastily cutting interest rates may not only cause inflation to rebound but also lead the market to blame the Federal Reserve for everything. The massive subsidies issued by the Treasury back then are actually the root cause of inflation, yet the market points its finger at the Federal Reserve.

So Powell plans to say, let’s endure the economic pain for half a year, and then prevent inflation from rebounding. Later, he can still loosen monetary policy, as there are plenty of tools available for easing. However, if inflation spirals repeatedly, it could take two or three years, and one would not know how long it would torment us.

The third point is Powell's self-interest.

Powell can serve at most until 2026, and generally, there are hardly any substantial actions taken in the last six months of a typical term. So his current goal is to proceed steadily and conservatively until the end of the year, ensuring that neither employment nor inflation experiences major issues, thereby preserving his reputation as Chairman of the Federal Reserve.

Powell will not take any reckless actions; he absolutely will not do anything that jeopardizes his integrity at the last moment. I have observed Powell for several years; essentially, he is someone who plays strictly by the rules.

The showdown between Powell and the ‘understanding king’ has ended, with the ‘understanding king’ being decisively defeated, publicly surrendering to the media and stating: there is no intention to fire the Chairman of the Federal Reserve. So Powell is now in an unbeatable state; as long as he does not want to do something, no one can pressure him, especially since the main committee of the Federal Reserve is aligned with him on interest rate issues.

Therefore, there is no reason to believe that the Federal Reserve will cut rates in June.

From a timing perspective, starting to cut interest rates at the FOMC meeting at the end of July is a relatively suitable point, because the next meeting is in September, and if rates are cut in September, it would be two months late, making the timing seem a bit slow.

So cutting rates at the end of July might be the most comprehensive and routine choice after consideration. If rates are cut in July, it would essentially give Powell nearly three months to observe the implementation of tariff policies and the impact on inflation.