Let's break down some core details from yesterday's Federal Reserve FOMC meeting.

First, against the backdrop of Trump once again publicly urging for rate cuts, Powell emphasized that the Federal Reserve remains politically independent.

Of course, the overall market was relatively stable, initially rising and then falling, with an overall cautious and wait-and-see sentiment.

Let's break it down, with the core conclusions at the end:

1. Interest Rates

12 votes unanimously maintained the interest rate at 4.25-4.50%, holding steady for four consecutive times while continuing to observe inflation and employment turning points (consistent with my previous analysis).

2. Dot Plot

The median for the end of 2025 is 3.9% (= two 25 bp cuts), and there will only be one more cut in 2026-27.

The number of members supporting no rate cuts has increased, showing a certain hawkish tendency.

3. Tariff Impact

This is the first time the Federal Reserve has explicitly listed tariffs as an inflationary risk in official documents. Due to pre-emptive stockpiling of imports and net export fluctuations lowering Q1 GDP, prices may rise in the future.

4. GDP 1.4%, Unemployment Rate 4.5%, PCE 3.0%

The economy is beginning to lean towards stagflation, with slowing economic growth, rising prices, and marginal loosening in employment.

5. Balance Sheet

The balance sheet reduction process remains unchanged, and there has not yet been a discussion about slowing the pace, maintaining the monthly cap.

In summary, three core conclusions:

- The probability of initiating a 50 bp arbitrage rate in September (starting rate cuts in September, with two cuts of 25 each) is the highest, unless inflation caused by tariffs exceeds expectations in terms of stickiness.

- The probability of recession is now very low; growth is slow but at least positive. The main concern about not cutting rates now is price stickiness and a cooling job market.

- Pay attention to the core PCE, ISM services price components, and Employment Cost Index (ECI) for July-August, as they relate to whether there can be two rate cuts this year.