Interest rate cut in September turns from good to bad. Heavy drop? No cut, bull market extended?
The interest rate cut in September is basically stable, but the extent may be conservative (25 basis points)
If the employment data explodes, then a heavy cut (50 basis points) is possible
94.4% of people bet that there will be an interest rate cut in September (CME data)
The probability of a 25 basis point cut is the highest (about 94.8%)
The probability of a 50 basis point cut is low (5.2%), unless employment collapses (unemployment rate soars)
What does the Federal Reserve say?
Just announced at the end of July that the interest rate remains unchanged (4.25%-4.50%)
Powell expressed caution: Interest rate cut in September? We need to look at the data again!
But the market remains stubborn: the expectation of an interest rate cut has cooled down, but has not disappeared!
Economic background:
The U.S. economy is doing well, but the job market is a bit soft
Inflation is close to 2% but has not yet met the target
Trump's trade policies increase uncertainty, which may force the Federal Reserve to take action