Market confidence in the Federal Reserve initiating interest rate cuts in September is gradually weakening, and the upcoming release of the June CPI data on Tuesday is seen as a key factor in determining the direction. Due to previously released employment data far exceeding expectations, investors have largely ruled out the possibility of a rate cut this month. Currently, the market's expected probability of a rate cut in September is about 70%, which has significantly declined from the high certainty seen at the end of June.
The consumer price index (CPI) for June has become the focus of this week. Zachary Griffiths, head of investment-grade and macro strategy at CreditSights, pointed out that this data "is expected to provide directional guidance for the Federal Reserve's policy tone in the second half of the year and market risk appetite." According to a Bloomberg survey of economists, the year-on-year core CPI in the U.S. for June may rise to 2.9%, the highest level since February. Barclays' analysis shows that historically, the June CPI often brings a high level of surprise.
This round of inflation data is critically significant—if the data shows that price pressures have increased following the implementation of Trump’s tariff measures, the Federal Reserve's room for a rate cut in September may further narrow, and market interest rates may rise accordingly. Conversely, if the CPI performs moderately, it may reinforce market expectations for easing policies, influencing market trends and guiding the Federal Reserve's subsequent actions.
