The Fed's interest rate cut in September may be closer than most people expect.
There are many voices in the market saying "Powell is going to pour cold water again," but we need to understand that the market is never short of savvy individuals. Currently, 92% of bets are pointing towards a rate cut, which is certainly not a baseless guess.
First, let's look at market sentiment. Although retail investors are wildly betting on easing in real estate and cryptocurrency, institutions are not entirely retreating; instead, they are quietly positioning in interest rate-sensitive assets while withdrawing. Wall Street may be calling for caution, but from the option positions and U.S. Treasury purchases, they have long been preparing for a "just in case of a rate cut" hedge.
Now, let's discuss several major reasons for a rate cut.
First, the growth pressure is accumulating, with manufacturing PMI continuously shrinking, the real estate financing chain becoming increasingly tight, and significant refinancing pressure on corporate debt.
Second, the policy window is there; Biden is in an election year, and economic stability is key. Although the Fed emphasizes "independence," political pressure is undoubtedly real.
Third, financial stability must be a priority. Although U.S. stocks are performing strongly, the credit spread has begun to widen, and maintaining high interest rates is undoubtedly a dead end.
Additionally, concerns about inflation may be somewhat overblown. The "super core" inflation seems fierce, but high-frequency components like rent and used cars have clearly cooled down.
Tariff impacts do exist; however, there is a lag in their transmission. The Fed can certainly cut rates once, and then adjust based on the situation later. Employment data looks good, but leading indicators such as the number of temporary workers and hours worked are already weakening.
Speculating on Powell's possible actions on Friday, he is likely to maintain a hawkish stance verbally, saying "we act based on data" and "not influenced by politics," but in action, he may lean towards a dovish approach, not outright denying the possibility of a September rate cut, leaving the market with a glimmer of hope.
If the Fed sends a dovish signal, real estate, technology, Bitcoin, and gold are likely to rise directly; if Powell maintains a tough verbal stance but leaves room for maneuver, the market may first drop and then rise, increasing volatility; even if an unexpected hawkish attitude emerges, it may provide an opportunity for lower buying levels.
