The market probably should not expect interest rates to be lowered soon. FOMC will announce the latest interest rate decision on Thursday Beijing time. The CME Group's FedWatch Tool shows that traders are certain that the Fed will keep interest rates unchanged.

Although the FOMC predicted three rate cuts this year in the December 2020 dot plot, Fed Chairman Powell has been reiterating throughout the year that nothing is set in stone and the Fed is willing to stick to rate cuts until it is certain that the economy has cooled enough.

Powell said in a group discussion in May that "it's notable that inflation in the first quarter didn't show much increase." He added, "We don't see this as a flat road, but I think it's higher than anyone expected, and that tells us we need patience to let the restrictive policy work."

The CPI data released last month showed that the US April CPI increased by 3.4% year-on-year, meaning that inflation is still high. The next CPI report will be released on Wednesday.

The US labor market showed some momentum in May, adding 272,000 jobs, well above economist expectations.

Julia Pollak, chief economist at ZipReruiter, said, "Our labor market is very interesting. This is not the norm of the past, but a new norm. Employers are firing workers more slowly, hiring workers more slowly, and employees are changing jobs more slowly. This may be a good thing or a bad thing. Some of the reasons are uncertainty, fear, and high interest rates that suppress economic activity. However, in other ways, this is a good thing because some of it is related to the improvement of employment during the epidemic."

The US unemployment rate rose slightly to 4.0% in May, the last time the unemployment rate reached this level was in January 2022. Nick Bunker, director of North American economic research at Indeed Hiring Lab, said the May unemployment rate was "still historically low."

However, Joseph Briggs, an economist at Goldman Sachs, said that although rate cuts "were partially postponed by the more difficult inflation in the first quarter, we do think that we will have two rate cuts later this year starting in September."

Powell previously outlined the conditions for rate cuts. At the May press conference following the FOMC's decision to keep rates stable, Powell said there were two ways for the Fed to have enough confidence to cut rates: more data showing that inflation is close to the Fed's 2% target, or "unexpected weakness in the labor market."

Powell said at the time, "If the fact is that inflation is more persistent than we expected, the labor market is still strong, but inflation is "sideways," and we don't have greater confidence, then postponing interest rate cuts may be appropriate."

David Kelly, chief global strategist for JPMorgan Asset Management, also believes that the Fed may cut rates twice this year. "I think there will be enough weakness and cooling in the economy to allow the Fed to cut rates this year. If you ask me to bet, I would bet that we will have two rate cuts, one in September and one in December."

Some Democratic lawmakers have been urging the Fed to cut rates to give Americans some breathing room, especially after the European Central Bank's first rate cut in five years. Senators Elizabeth Warren, Jacky Rosen, and John Hickenlooper wrote in a letter to Powell on Monday that the ECB's actions signal that it's time for the Fed to follow suit and cut rates. They wrote:

"The Fed's decision to keep rates high will continue to widen the gap between Europe and the United States, which could push up the dollar and tighten financial conditions. You have kept rates high for too long, and now it is time to cut rates."

The Federal Open Market Committee (FOMC) will hold a press conference on monetary policy at 2:30 a.m. Beijing time on June 13. Welcome mooer to make an appointment to watch~

Editor/Somer