The latest predictions from Federal Reserve officials suggest that they expect to only cut interest rates once this year, a decrease from the three times predicted in March. In addition, officials also predicted that the bottom rate of this round of interest rate cuts will be higher than previously expected, meaning that the high rate era may be more prolonged than expected, intensifying the policy stance with other central banks that have already started easing monetary policy.

According to reports, Federal Reserve Chairman Jerome Powell did not take any action to encourage market expectations for recent interest rate cuts after the latest meeting. He stressed that lowering the federal fund rate target range is inappropriate unless the Federal Reserve is more confident that the inflation rate will continue to move towards its 2% target.

In contrast to the Federal Reserve, the Bank of Canada last week lowered its overnight benchmark interest rate by 25 basis points to 4.75%, becoming the first central bank in the G7 to enter a loose cycle. The European Central Bank followed suit, lowering its benchmark interest rate by 25 basis points to 3.75%, and the Swiss National Bank has also started cutting interest rates since March.

The Federal Reserve's policy differences have significant implications for the global economy. Rising US rates may boost the dollar and attract outflows from competing economies, particularly emerging markets. Bloomberg Economic Research analysis suggests that maintaining the Fed's interest rates unchanged may trigger concerns about harmful currency volatility and may undermine efforts to reduce inflation.

Kristina Hooper, Invesco's Chief Global Markets Strategist, pointed out, "The overall trend in developed Western economies is towards interest rate cuts, but this process will not happen overnight. The Federal Reserve did not lead this time. Last week we witnessed interest rate cuts by two G7 central banks, while the Federal Reserve remained unchanged."

Tiff Macklem, Governor of the Bank of Canada, said that although there are limits to interest rate differences, they are not currently close to this limit. This difference may reinforce the mainstream trend of the 2024 monetary market, with the high relative yield of the United States making investment in US assets and the US dollar an opportunity not to be missed by investors in Europe and Asia.

Since the benchmark interest rates of other economies were lowered this year except for Japan, their currency exchange rates have generally fallen. The euro against the dollar fell by more than 2%, and the Canadian dollar and Swedish krona fell by more than 3%. The Swiss franc fell by nearly 6%.

The Bank of Japan decided to maintain its monetary policy stance at the most recent meeting and stated that it will specifically explain the bond purchase plan at the next meeting. This decision stimulated the selling of the yen, as the market originally expected details on cutting the bond purchase plan.

Howard Du and Vadim Ialalov, currency strategists at Bank of America, found that driven by US relative yield and growth advantages, this year's dollar buying activity mainly occurred outside of US trading hours and was dominated by investors in Europe and Asia.

Nathan Thooft of Manulife Investment Management said that the Federal Reserve is currently considered more hawkish than most other global central banks. He expects the Fed to eventually start an interest rate cut cycle, but relative to other central banks, its interest rate level is higher and its start time is later.

Jerome Haegeli, Chief Economist of Swiss Reinsurance, said that even if the Federal Reserve does cut interest rates, given that inflation is still strong in some areas and far above the 2% target, the magnitude of the interest rate cut may be limited.

After the smallest annual increase in key inflation indicators in more than three years was announced, traders believe that the probability of a Fed rate cut is high in September. However, because policymakers have warned that inflation is still a threat, it cannot be guaranteed whether the European Central Bank or other central banks can take further action, which may limit this divergent trend.

Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, said another risk is that cutting interest rates prematurely will lead to a resurgence of inflation and interest rate cuts will have to be reversed. This is why the Federal Reserve has been so patient in launching a loose cycle.

In fact, the Federal Reserve is not the only central bank leaning towards hawkishness. The Bank of Japan faces pressure to raise interest rates due to sustained weakness in its currency, while the Reserve Bank of Australia continues to warn of ongoing pricing pressure. These dynamics indicate that although there are differences, global central banks still need to remain vigilant and patient in addressing inflation issues.