Is the Federal Reserve staying put today? Is Powell holding back a big move or continuing to play coy?
The Federal Reserve is having a meeting today, and the three critical questions are whether to cut interest rates, the direction of the economy, and what Powell will say. The market feels that the probability of a rate cut today is basically zero, but there's a 14.5% chance in July, and it jumps to 64% in September. In my view, the Federal Reserve is more conflicted than anyone else—economic growth is starting to cool down, inflation is also decreasing, so logically, they should loosen up a bit; however, the conflict in the Middle East has pushed oil prices up by 20%, and we don’t know when the tariff bomb will explode. What if prices rise again?
Powell will definitely play coy today! I bet he won't dare to say 'we need to inject a lot of liquidity' or 'we must hold our ground'—those kinds of tough statements. At most, we’ll hear the usual bureaucratic language of 'let’s see the data.' After all, even the Federal Reserve is uncertain right now. It's too early to make a statement; if the economy suddenly collapses or inflation rebounds, it would be embarrassing. I think he’ll hold out until July, waiting for the second-quarter economic report before daring to make predictions for the second half of next year.
To put it bluntly, we are currently in a phase where the Federal Reserve and the market are testing each other. We ordinary people shouldn’t be fooled by those 'countdowns to rate cuts'; Powell is the master of managing expectations. Today's performance will likely be a lot of noise with little action, and any real big moves will have to wait until fall.
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