Federal Reserve Interest Rate Decision Expectations Divergence
There are significant divergences in market expectations regarding the Federal Reserve's interest rate decision. This divergence is primarily reflected in differing views among Federal Reserve officials on whether and when to cut interest rates, as well as different expectations from the market regarding the future direction of Federal Reserve policy. The specifics are as follows:
1️⃣ The hawks advocate for an immediate rate cut
2️⃣ The moderates tend to favor cautious decision-making
3️⃣ The doves wait for clear evidence of economic weakness
Increasing Polarization of Policy Positions
There is a significant divergence in positions within the Federal Reserve, and voting members may oppose the consensus for the first time in 30 years. Vice Chair Bowman and Governor Waller are inclined towards a rate cut and may vote against maintaining rates at the July meeting. Main points of divergence:
• Doves emphasize the downward trend in inflation
• Hawks are concerned about premature easing of policy
• Moderates tend to wait for more economic data
Core Influencing Factors
The divergence in market expectations is rooted in:
• Non-farm payroll data shows a gradual cooling of the labor market
• Core CPI remains at 5.1%
• Geopolitical tensions causing fluctuations in energy prices
CME futures indicate a 75% bet on a 25 basis point rate cut in September, but the probability of a 50 basis point cut before December has dropped to 40%.
Binance Market Analysis
Federal Reserve Decision Logic
Moreover, there are differing expectations in the market regarding whether the Federal Reserve will cut rates in September. According to the pricing of federal funds futures contracts, investors have assigned a probability of over 60% to a rate cut in September, and Citigroup economists believe that a September rate cut is quite likely. However, there are also opinions suggesting that Federal Reserve officials may not want this probability to rise further before the economic data is released prior to the meeting. How Powell expresses himself at the press conference after the July 30 meeting will be an important indicator.
