Source:Brokerage China. Original title: "Federal Reserve, sudden heavy news!"

On August 9th local time, the Federal Reserve announced the tentative schedule for the Federal Open Market Committee (FOMC) meetings in January 2025, 2026 and 2027. The Federal Reserve adheres to the traditional schedule of holding eight meetings each year.

It is worth noting that in the eve of the U.S. election, the question of whether the Federal Reserve can maintain policy independence is becoming more and more intense. Wei Li, BlackRock's global chief investment strategist, warns that if former U.S. President and Republican presidential candidate Trump returns to the White House, it will challenge the Fed's independence. Lawrence Summers, former U.S. Treasury Secretary, warns not to let the president intervene in monetary policy formulation, otherwise it will only damage the economy over time.

Regarding the Fed's interest rate outlook, Summers said that at the policy meeting in September, "cutting interest rates by 50 basis points may be appropriate." Goldman Sachs' latest report also pointed out that the Fed is expected to cut interest rates by 25 basis points in September, November and December (previously cut interest rates once per quarter).

Latest Announcement of the Federal Reserve

On August 9th local time, the Federal Reserve announced the tentative schedule for the Federal Open Market Committee (FOMC) meetings in January 2025, 2026 and 2027.

The Federal Reserve adheres to the traditional schedule of holding eight meetings a year.

The FOMC statement will be released at 2:00 pm Eastern Time on the second day of the meeting, followed by the Fed Chair's press conference at 2:30 pm.

It is worth noting that in the eve of the U.S. election, the question of whether the Federal Reserve can maintain policy independence is becoming more and more intense.

Wei Li, BlackRock's global chief investment strategist, warns that if former U.S. President and Republican presidential candidate Trump returns to the White House, it will challenge the Fed's independence.

On August 8th local time, Trump said at the news conference at his Bedminster clubhouse that as a successful businessman, his instincts are often better than Federal Reserve officials or presidents. He also criticized Fed Chairman Powell for acting either "a little too early or a little too late" when adjusting interest rates.

Currently, investors and economists generally expect the Fed to cut interest rates at the September meeting. Trump has said that he believes the Fed should not lower interest rates so close to the election. However, in his campaigns, he often said that if re-elected, he would like to lower interest rates. Powell promised not to let political pressure influence the Fed's decisions.

In response, an aide to Harris, the U.S. Vice President and Democratic presidential candidate for 2024, said on August 9th local time that Harris believes that the Fed's decisions should be independent of the President.

Lawrence Summers, who served as U.S. Treasury Secretary during the Clinton administration and is known as the "siren" of U.S. inflation, also warned on August 9th that the President should not interfere in monetary policy formulation, otherwise it will only damage the economy over time.

In an interview with the media, Summers said that the U.S. president has many things to do at any time, and in fact, his relationship with the economy is far less close than the 19 members of the Federal Reserve Board of Governors and the Fed Chair, who focus on constantly reviewing every economic statistic. He emphasized that central banks in various countries around the world have long granted independence because they recognize that there are "serious conflicts of interest" for politicians in monetary policy.

Summers said, "Politicians will always be unable to resist printing more money, lowering interest rates-the equivalent of stepping on the accelerator to boost the economy. This will raise people's inflation expectations and push up long-term interest rates. You will only get higher inflation without any substantial output growth."

Major changes

Regarding the Fed's interest rate outlook, Summers said that given that market volatility and stock sales have eased since Monday's turmoil, "based on current facts," any emergency interest rate cuts by the Fed are unnecessary, but his views on interest rate cuts have undergone significant changes.

Summers said that at the policy meeting in September, "cutting interest rates by 50 basis points may be appropriate."

Summers' latest comments are almost a big reversal from his consistent hawkish stance.

On June 24th, he even said that the Fed and investors' judgment of inflation path was "seriously wrong." Considering that the U.S. budget deficit is at a record high and continues to grow, he believes that people's expectations of inflation are somewhat too optimistic, and fiscal challenges will continue to support demand and put upward pressure on prices.

Somers has always been known as the "whistleblower for high inflation in the United States". Last year, he believed that the market and policy makers exaggerated the possibility of multiple interest rate cuts in 2024, and believed that the Fed seriously underestimated the long-term neutral interest rate level.

In addition, according to a survey by Bank of America, the proportion of investors who believe that the dollar will weaken has almost doubled in the past month as the market prepares for a Fed rate cut.

In the bank's monthly confidence survey, about 23% of respondents said that their most confident trade was shorting the US dollar, the highest proportion since this year and higher than the 8% in July. The dollar has outperformed most G-10 currencies this year, but its rise has faded in the past month as data shows the US economy losing momentum, prompting traders to bet on a significant Fed rate cut. Although there has been some rebound since then, the market still expects a 100 basis point rate cut this year, compared to about 65 basis points a little over a week ago.

"Investors are no longer worried about the huge upside risk to the dollar caused by stubborn inflation." Ralf Preusser, Bank of America's interest rate strategist, said, "This should start the dollar's retracement from historic highs."

CME's Fed Watch tool shows that futures traders have significantly reduced their bets on a 50-basis-point Fed rate cut in September, with the probability of a 25-basis-point rate cut at around 50%.

Goldman Sachs pointed out in a recent report that the weak performance of the labor market in the United States in July has exceeded expectations, with weak wage and household employment growth, and the unemployment rate further rose by 0.2 percentage points to 4.3%. Therefore, the probability of a recession in the US economy has been raised by 10 percentage points to 25%, and it is expected that the Fed will cut interest rates by 25 basis points in September, November and December (previously once per quarter).

However, Goldman Sachs emphasized that although some economic data in the United States have shown weak performance, investors' concerns about a recession in the US economy may have been overreacted, and the severity of the economic recession has been exaggerated.

Goldman Sachs also reminded that the future needs to closely watch the US presidential election, the results of which may have important impacts on the macro economy and the market.

Editor/Emily