Goldman Sachs just released a report predicting that the Federal Reserve might make significant moves starting in September. They believe it's very likely that there will be three consecutive rate cuts this year, each by 25 basis points as a standard operation. Interestingly, they added a supplementary clause to this prediction: if next month's unemployment rate data continues to rise, there might be a hefty 50 basis point cut in September.

To be honest, this prediction is quite interesting. The market is currently focused on employment data, as inflation has come down, but if the job market can't hold up, the pressure on the Federal Reserve will be completely different. I remember when the non-farm payroll data came out last month, there was already a hint of trouble, with new job numbers falling significantly short of expectations. If this trend continues, it is indeed possible that the Federal Reserve will take decisive action.

However, Goldman Sachs' prediction is considered relatively aggressive. Other major banks, like Morgan Stanley, are still on the sidelines, feeling uncertain about whether there will be a cut in September. Moreover, there is still some time before the September interest rate meeting, and we have to go through the two non-farm reports in July and August, so there is still quite a bit of uncertainty. Several trader friends I know have mentioned that the current market expectations are like walking a tightrope; even a slight data surprise could trigger significant volatility.

Speaking of this, it suddenly reminds me of the preventive rate cut in 2019. At that time, employment data also started to weaken, and the Federal Reserve cut rates without hesitation. The current situation is somewhat similar, with inflation being initially controlled, but economic momentum starting to weaken. However, current interest rates are much higher than they were back then, so there is indeed plenty of room for cuts. It's just unclear what Powell and the others are really thinking, especially since they have been adamant about needing to see more data...