This time there may really be an unexpected interest rate cut!
In the past, if you said the Fed would cut rates under Trump's coercion, it would certainly not be agreed upon. Although the Fed is not completely independent, it must at least be responsible for the dollar; the dollar is its liability. The most important premise for the existence of a central bank is to maintain currency stability. Since the end of 2023, I have held this view: the Fed's rate cuts will be very cautious, and the facts also support this. Even if other major currencies are cutting rates (except Japan), the Eurozone has already cut rates by several hundred basis points, creating a 200bp interest rate differential with the dollar. Coupled with political intimidation, it still chooses silence. The previous view was also clear; it may have underestimated the transmission time of tariff policies. After all, replenishment and consumption take time, and high-tariff goods actually have no few months.
Just from the market perspective, as long as the CPI does not continue to rise and exceed 3%, the real interest rate is approximately between 1% to 2%, and it has been sustained for a long time. If we only look at market behavior, perhaps the Fed might indeed cut rates early like the Eurozone, but we cannot ignore Trump's tariff policies and a package of stimulus measures, such as significantly increasing the fiscal deficit. The few tariffs cannot compare to the interest, which accounts for about 20% of fiscal spending. There is an increase in tariffs, but the issue of debt accumulation has not slowed down. Naturally, the market heat will not shrink just because the real interest rate is positive; rather, it might heat up again under stimulus policies.
Now the market is basically clear. The United States has reached framework agreements with multiple major economies in the short term. At least in the short term, tariffs can be reduced, which will alleviate supply shocks. They have also continued to extend temporary tariff agreements with our country. Therefore, unless Trump stirs up something major before September, otherwise, when the CPI in July and August is relatively stable and meets or is below market expectations, it will create political space for interest rate cuts.
The market has already supported interest rate cuts, and the policy side has also created space for rate cuts. This is the previous conclusion. If Trump is not foolish and wants to promote the Fed’s interest rate cuts quickly, the choice is actually in his own hands. He just needs to quickly reach agreements with major economies to reduce policy uncertainty. The Fed does not mind cutting rates, and it may even exceed expectations.
When might a 50bp interest rate cut occur? The data in August is particularly crucial:
1) Inflation is below market expectations, for example, below 2.7%.
2) The unemployment rate continues to rise, for example, above 4.2%.
If these two combinations appear, there might indeed be a 50bp interest rate cut. Conversely, if both indicators meet market expectations, a rate cut will also occur, with a high probability landing at 25bp. If signs of economic overheating occur, such as continued inflation increase and a decrease in the unemployment rate, then the Fed will lose the basis for cutting rates and may need to be wary of inflation rebounding, issuing strong hawkish statements again.
The team still has positions; they will never let fans miss out! Hurry and get on board!
Continuously pay attention to: BCH MYX ILV BNB ETH ENA
#币安HODLer空投PLUME #加密市场回调 #俄乌冲突即将结束？ #Strategy增持比特币 #ETH质押退出动态观察
