Source: Wall Street See
Some viewpoints believe that the Federal Reserve's decision to cut interest rates in September is more procedural than economic. Some market participants worry that if the Fed delays the rate cut too long, the US economy may face the risk of a recession.
The unexpected weakness of US June CPI data has intensified the market's expectation of interest rate cuts, making it more likely that the Federal Reserve will cut interest rates in September.
Data shows that the year-on-year growth rate of core CPI in June fell to 3.3%, the lowest in more than three years - the trend of inflation continuing to steadily decline means that interest rate cuts must be put on the agenda as soon as possible.
In fact, the Federal Reserve also has a meeting on July 31st before September 18th. According to Fedwatch, the market is betting that there is only a 6.7% chance of a rate cut in July.
If the reason for the interest rate cut is so sufficient, why wait until September?
Some believe that the Federal Reserve's decision to wait until September to cut interest rates is procedural rather than economic.
With less than three weeks to go until the end of July, it means the Fed has hardly any time to prepare for rate cuts in an orderly manner. But if the Fed waits until September to cut interest rates, the US economy may face more downside risks.
Some market analysts are concerned that if the Federal Reserve delays rate cuts for too long, the US economy may face the risk of a recession. The overnight reaction of the US stock market to CPI data is proof of this.
Federal Reserve Chairman Powell also said at this week's congressional hearing that the labor market is cooling, which on the one hand weakens the upward momentum of inflation, and on the other hand brings uncertainty to the economic outlook.
There are also signs that the high interest rate environment is continuously suppressing the driving effect of consumption on the economy.
According to previous reports, US consumer companies have been issuing warnings, saying that the purchasing power of US consumers is nearing its limit, and even consumer giant PepsiCo has attributed weak sales to long-term inflation accumulation and high borrowing costs.
Therefore, some believe that from now until September, the Federal Reserve may frequently 'release doves', which is bullish for the bond market.
Editor / jayden