Today, the captain and everyone are going to burst a "bubble": The Federal Reserve may cut interest rates in September, but many people may have placed their bets wrong!

Currently, the market sentiment is polarized. Ordinary retail investors are eagerly awaiting interest rate cuts, while large institutions on Wall Street have quietly withdrawn and taken precautions. Don't be fooled by those seemingly enticing probability predictions. Below, I will break down three key perspectives on why the expectations for interest rate cuts are untenable.

Inflation, the "beast", remains fierce. The core inflation rate in July rose by 3.1% year-on-year and also had a 0.3% increase month-on-month. More troublesome is the "super core inflation", which surged by 0.55% month-on-month. It is closely related to wage growth and is a stubborn problem that the Federal Reserve finds most troublesome. Cutting interest rates at this time would undoubtedly add fuel to the inflation fire, causing prices to spiral out of control like a runaway horse.

The impact of tariffs is like a "hidden bomb". The tariffs imposed by Biden have not yet fully transmitted to terminal prices. If, in the coming months, commodity prices suddenly soar and the Federal Reserve cuts rates again, it would be self-sabotage, and inflation would spiral completely out of control.

The job market is as stable as a mountain. The unemployment rate is below 4%, and hourly wage growth is at 4.1%, which is unrelated to "economic recession". There are even members within the Federal Reserve opposing interest rate cuts, believing that the job market is solid, and cutting rates would only stimulate inflation to rebound.

Powell’s speech on Friday is likely to be the "heavy hammer" that shatters the illusion of interest rate cuts. He will present data indicating that the key data for August will only be released in September, and there is currently no basis for cutting rates. He will also emphasize inflation risks and counter the political kidnapping questions. At that time, the probability of a rate cut in September will likely decline significantly.

In the current market, retail investors are still blindly "betting" on interest rate cuts, while institutions have already run away to hedge. Historical experience tells us that when retail investors and institutions gamble against each other, the former often suffers heavy losses.

For retail investors, it is essential to be wary of the volatility risks of interest rate-sensitive assets and not to blindly follow the crowd; keep a close eye on the inflation and employment data for August, as this is the key to decision-making; maintain rationality and do not be swayed by market sentiment. The Federal Reserve currently has no reason to cut rates, and retail investors should not be "fooled" by the expectations of rate cuts!

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