Let's break down some core details from yesterday's Fed FOMC:
Interest rates remain at 4.25%-4.5%, unchanged for the fourth consecutive time. They claim to be watching inflation and employment, but in reality, they are waiting for data to provide a way out. The dot plot indicates the possibility of two rate cuts next year (each by 25 basis points), but there is internal disagreement, with more support for not cutting rates, indicating a hawkish stance is emerging. Tariffs are mentioned for the first time by the Fed as an inflation risk, fearing that a tariff war could drive up prices, which may hinder the pace of rate cuts.
Economic data is starting to look odd: GDP expectations have been cut to 1.4%, unemployment has risen to 4.5%, and inflation is still stuck at 3%. This combination indicates "slowing economic growth, rising prices, and a loosening labor market" — a typical sign of stagflation. The Fed is currently hesitant to cut rates, fearing both a resurgence of inflation and a sudden collapse in employment.
The balance sheet reduction continues, but market liquidity is already tightening. If the economy truly faces issues, the balance sheet reduction could be halted at any time, but for now, they are still holding on.
Personal opinion:
Rate cuts will eventually come, but don't expect major actions before September unless the tariff war drives inflation above 4%. Recession? No need to panic for now; the economy hasn't contracted yet. Keep a close eye on July-August data: core prices, service industry prices, and wage costs; these three indicators will directly determine whether rates can be cut twice this year.
To be honest, the market is currently "half-alive" — it hovers sideways without major negative news, and it plunges with geopolitical risks. When will my short position of over 90,000 be unwound? Conservatively, July-August, but the oscillation above 100,000 may take longer than expected.
The Fed's recent actions are like "walking a tightrope"; we, as small investors, can only fasten our seatbelts and not be thrown off the bus.
