U.S. stocks are down, gold is down, U.S. Treasury bonds are down, and only the dollar is up—this familiar scene is backed by a familiar formula—the market's bets on a Fed rate cut are weakening.
Last night, three regional Fed Presidents spoke, dousing cold water on the market.
Around 19:00, Kansas City Fed President Schmidt stated that there seems to be no need to rush into a rate cut at this time. The increase in tariffs will raise the risk of inflation rising before the end of the year, and the current inflation risk is greater than the risk of problems in the labor market.
Around 20:00, Atlanta Fed President Bostic stated that he still expects one rate cut this year (while the market expects two). In today's environment, any point forecast or outlook judgment comes with a large confidence interval.
Around 24:00, Cleveland Fed President Harmack stated that if a decision had to be made tomorrow, she would not support a rate cut.
The speeches of three officials spanned before and after the U.S. stock market opened, and they consecutively voiced similar opinions. This is not a coincidence but a deliberate arrangement of 'expectation management,' especially since the first speaker, Schmidt, was interviewed by CNBC. The market originally thought there was an 80% chance of a rate cut in September, which was directly reduced to 65% last night and finally returned to around 70%.
Powell will deliver a speech tonight at 22:00, and last night, the 'New Federal Reserve News Agency' suddenly published an article about Powell's living condition:
Powell told colleagues that he does not feel overwhelmed. At 72, he still maintains his best condition in life, swimming three times a week and working out with a personal trainer. This health regimen helps relieve stress, although he sometimes wakes up in the middle of the night.
This is a psychological battle: despite the strong winds and waves outside, the Fed Chairman remains calm.
