The US CPI report in June, which showed a comprehensive cooling-off, has intensified the expectation of a rate cut by the US Federal Reserve before the end of this year, and it may happen before the November election.

This kind of bet surge led to the recent decline of the US dollar, and many market sectors such as bonds, small-cap stocks, and residential builders soared.

Gavekal Research, a global research institution, points out that the current inflation data is more favorable for rate cuts compared to the end of last year. As of December last year, the annualized CPI for three months was lower than the Fed's target of 2% after adjustment. In addition, the core CPI, which excludes volatile food and energy prices, is also below the target value, and the annualized growth rate of the core CPI for three months is 1.8% after adjustment.

Gavekal Research pointed out that if the inflation rate continues to remain low and the Fed is confident of maintaining this state, then the policy interest rate is likely to be cut before 2024, possibly before the election.

Strategists said in a report: "Ideally, Fed Chairman Powell may lean towards not changing interest rates before the election, but this view may be overturned by data."

The research institute reviewed the historical precedent of the Fed changing interest rates in the months before the presidential election.

Since 1974, in the 10 months before 13 presidential elections, the Fed has changed interest rates 8 times and kept interest rates unchanged 5 times.

This history shows that if economic indicators prove necessary, the Fed will not avoid making policy adjustments during the election period.

While the market has reacted to the latest inflation data and its impact, the Fed, led by Powell, is still committed to responding to economic data with policy changes.

Therefore, Gavekal Research's strategist concluded that if the current downward trend in inflation continues, interest rate adjustments are likely to be made before the November election.

The Fed will enter a quiet period before the meeting this Saturday, and decision-makers, led by Powell, will make important comments this week to assess the issue of slowing inflation and consider whether to send signals to start lowering interest rates because of it.

As inflation rates gradually approach the 2% target, and concerns about how strong the job market can remain intensify, the Fed is likely to use the last few days to indicate that a rate cut is imminent, or to explain why recent data still does not support a shift to looser monetary policy.

Powell will be the first to have a dialogue with the co-executive chairman of the Carlyle Group, David Rubenstein, at midnight the next day. As for other Fed officials, Waller's speech at the Kansas City Fed event may be of particular interest. He has always been an important voice in the inflation debate and is considered a hawk, but his recent research has pointed out that the job market is in a further weakened state which may cause unemployment to rise faster.

Citigroup analysts wrote last Friday: "We expect a strong signal in July that the Fed will start cutting interest rates at the upcoming meeting, maybe in September if economic developments go as expected."

Currently, data from the CME Group's FedWatch shows that weak inflation in June has pushed the probability of a rate cut in September to over 90% among investors. In addition, some major banks and investment institutions have advanced their rate cut expectations.