Federal Reserve Interest Rate Decision Expectations Divergence
There are significant divergences in market expectations regarding the Federal Reserve's interest rate decisions. This divergence is mainly reflected in the differing views among Federal Reserve officials on whether and when to cut interest rates, while the market also has different expectations for the future direction of the Federal Reserve's policies. The specific situation is as follows:
1️⃣ The dovish faction advocates for an immediate rate cut
2️⃣ The centrist faction tends to favor cautious decision-making
3️⃣ The cautious faction waits for clear evidence of economic weakness
Policy Positions Become More Divided
There are significant divisions within the Federal Reserve, with voting members possibly opposing the consensus for the first time in 30 years. Vice Chairman Bowman and Governor Waller tend to favor a rate cut and might vote against maintaining the interest rate at the July meeting. The main points of contention are:
• Doves emphasize the downward trend in inflation
• Hawks are concerned about premature policy easing
• Centrists tend to wait for more economic data
Core Influencing Factors
The divergence in market expectations stems from:
• Non-farm payroll data showing a gradual cooling of the labor market
• Core CPI remaining at 5.1%
• Geopolitical tensions causing fluctuations in energy prices
CME futures indicate a 75% bet on a 25 basis point rate cut in September, but the probability of a 50 basis point cut before December has dropped to 40%.
Binance Market Analysis
Federal Reserve Decision Logic
Moreover, there are differing expectations in the market regarding whether the Federal Reserve will cut rates in September. Based on the pricing of federal funds futures contracts, investors have assigned a probability of over 60% for a September rate cut, and Citigroup economists believe the likelihood of a rate cut in September is high. However, there are also views suggesting that Federal Reserve officials may not want this probability to rise further before the economic data is released ahead of the meeting. Powell's statements during the press conference after the July 30 meeting will become an important barometer.
