A rate cut (25 basis points) is no longer news; a cut of 50 basis points is — and it is based on this expectation that the global market saw a massive rebound on Monday.
Traders have already bet that the Fed will cut rates by 25 basis points in September. Goldman Sachs predicts that if the unemployment rate rises further in the next report, a 50 basis point cut is possible.
Meanwhile, last night, Federal Reserve officials sent the most 'dovish' signals yet — that two or more rate cuts may be needed this year.
San Francisco Fed President Daly stated that the timing for a rate cut is approaching, 'I am willing to wait another cycle, but I cannot wait indefinitely; I tend to think that every upcoming meeting may take action.'
First, views on employment — are 'slowly cooling'; it is not yet a crisis, but we can no longer pretend not to see it.
$ETH Original quote: These data (July non-farm) do not indicate that the job market is precarious. In times of economic turmoil, raw employment data often lacks the reference value of ratios like the unemployment rate. The unemployment rate only rose by one-tenth of a percentage point in July, to 4.2%. However, from the labor market indicators, there is 'increasing evidence' that the labor market is significantly softening compared to last year. I believe further softening will be an unwelcome outcome.$BTC
Second, views on inflation — the concern is that if we wait too long to confirm that inflation has not picked up, it may already be too late to act.
Original quote: There is no evidence that tariff-driven price increases are broadly permeating inflation; if the Fed waits long enough to determine that this will not happen — a process that could take six months or a year — then it will 'definitely' act too late.
Third, policy stance — ready to act.
Original quote: The Federal Reserve is entering a 'trade-off space', where it needs to judge what level of policy can continue to apply downward pressure on inflation while ensuring sustainable employment,” she said. “This is also why I believe the policy adjustment in July was not necessary, but I do think current policy is increasingly out of touch with reality (translated, this means that while I do not regret not cutting rates last time, I increasingly feel that — we can no longer delay; if we delay further, policy will become disconnected from reality).
Daly presented two scenarios:
Fewer than two rate cuts: If inflation rises and spillover effects occur, or the labor market rebounds, we can certainly cut rates fewer than two times.
More than two rate cuts: If the labor market seems to be entering a downturn and we still do not see inflation spillover effects, then I believe we should also be prepared to take more action.
But Daly believes it is more likely that it may be necessary to cut rates more than twice.
Next, we may see the second and third Dalys appear.
