The market is firmly expecting the US to cut interest rates in September, but Carl Weinberg, the chief economist at High Frequency Economics, believes that the Fed has good reason not to cut rates at that time.

According to data from the London Stock Exchange Group (LSEG), after the consumer price index was reported lower than expected, the currency market pricing for the Fed's autumn meeting to cut interest rates increased from about 70% to over 90%. Previously, Federal Reserve Chairman Powell said earlier this week that maintaining high rates for a long time carries risks, a comment interpreted by analysts as 'moderately dovish' and further enhancing expectations of a rate cut.

However, Weinberg pointed out in an interview with the 'European Financial Forum' on Friday that there are also risks to easing monetary policy, which casts a shadow over the prospect of a rate cut.

Weinberg said, 'Powell was very clear in his testimony this week that inflation indicators and the overall economy are moving in the direction we want. He said this includes unemployment at around 4%, inflation moving towards 2%, and economic growth being roughly at potential.'

Weinberg continued, "But he also hinted that if the economy is at full employment, the inflation is where we want it, and the economy is growing well, why would we change anything? Why would we interfere with what we have? Why would you want to cut interest rates in that situation? There is noise, rumors, and data supporting a rate cut at the September meeting. However, there is also a dark cloud hanging over that decision.'"

Weinberg added that although a rate cut in September seems possible now, many things could change between now and the Fed's meeting on September 19th.

There are still two CPI reports to be released before that. The next Fed meeting is at the end of July, and the market expects only a 5% chance of a rate cut at that time.

Although the peak inflation rate in the US has been lower than many other major economies in the past three years, its decline has also been slower, which has left the Fed behind on the path of monetary policy easing.

Central banks in the Eurozone, Switzerland, Sweden, and Canada have cut interest rates this year, while the Bank of England's decision in August is in a delicate balance.

Edited by Jeffrey