Before the FOMC on September 18, there are four data points to consider: two CPIs for July and August; one PCE for July; and one non-farm payroll for August.

We need to understand that while the annualized growth of the U.S. GDP for Q2 at 3.0% seems strong, it is not driven by real economic expansion, but significantly influenced by inventory and trade distortions caused by tariffs. After removing the 'noise' from tariff and inventory fluctuations, the final domestic sales for Q2 (which excludes trade and inventory, including private consumption + fixed investment) only grew by about 1.2%, one of the lowest growth rates in the last two years. The annual GDP growth rate is expected to be about 100 basis points lower than last year.

Although it currently seems likely that a 25 basis point cut will occur, if subsequent data deteriorates, the possibility of a one-time cut of 50 basis points will significantly increase. Or even if only a 25 basis point cut is made in September, it may follow a similar pace as in 2024 with cuts of 25 basis points in both October and December, totaling three consecutive cuts.

As U.S. economic data continues to weaken, the Federal Reserve's options are being rapidly constrained. Before the market perceives a recession, proactively guiding to a 50 basis point cut to allow for policy space may be a good option. However, doing so may inevitably lead the market to believe that the Federal Reserve is making choices under pressure from Trump and a market recession. Balancing this out, a 25 basis point cut seems the most prudent, after all, Powell's request might just be to land safely and enjoy retirement.