Federal Reserve Interest Rate Cut Chaos: The Market Bets Wildly, But Reality May Be More Cruel!
The current financial market is caught in a mad gamble over the Federal Reserve's interest rate cuts, with fierce competition among various forces, but real data may let these expectations fall flat.
Here are the key points:
1. The market is betting wildly on rate cuts, with some even calling for "150 basis points"
Former Treasury official Bassent has publicly called for the Federal Reserve to cut rates by 150 to 175 basis points, believing that current rates are too high and could stifle the economy.
Traders are frantically betting on a rate cut in September, with the CME FedWatch tool showing a probability as high as 96%.
UBS analyst Heffler even predicts a potential 100 basis point cut in September, far exceeding market consensus.
2. Division within the Federal Reserve, political pressure intensifying
At the July monetary policy meeting, two Federal Reserve governors voted against maintaining rates, calling for an immediate rate cut, marking the first division of its kind since 1993.
3. Inflation and employment data complicate the prospects for rate cuts
Inflation remains stubborn: Core CPI has risen to 3.1%, rebounding for two consecutive months, with some analysts warning that rate cuts could reignite inflation.
Cooling job market: In July, non-farm employment added only 73,000 jobs, with May and June data being significantly revised down, and the unemployment rate rising to 4.2%.
The Federal Reserve's dilemma: If inflation does not fall, a hasty rate cut could trigger stagflation risks; but if employment deteriorates too quickly, they may have no choice but to cut rates.
4. September rate cuts remain uncertain, and the market may be overly optimistic
Institutions like JPMorgan believe that unless economic data deteriorates sharply, the Federal Reserve may delay rate cuts until the end of the year.
If the Fed only cuts rates by 25 basis points in September, it could trigger a sharp market correction.
5. Conclusion: A Dangerous Gamble
Current expectations for rate cuts resemble a market carnival more than a judgment based on sound economic logic. The Federal Reserve faces a triple whammy of inflation, employment, and political pressure, and the final decision may leave some investors "on the rooftop" while others "pop champagne."
Key questions:
Will there really be a rate cut in September? If inflation does not decrease, the Federal Reserve may be forced to delay.
By how much?
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