The Federal Reserve is expected to maintain the current interest rate level in its latest decision this week. The focus of the market will be on whether the Fed will provide any signals about the timing of future rate cuts.

Recent CPI and PPI data has been weaker than expected, prompting market participants to bring forward their expectations for the next rate cut. The money market has fully priced in the possibility of a rate cut in October this year, with a significant chance of action as early as September.

Previously, the market generally expected a rate cut to occur in December. Citi analysts point out that the market may currently be underestimating the risk of a rate cut. However, the U.S. tariff increases could push inflation higher, and if tensions between the U.S. and Iran escalate further, leading to a continued rise in oil prices, this could further delay the Fed's rate-cutting pace.

Allianz analysts indicate that in the context of high inflation, the Fed is unlikely to hastily ease monetary policy.