Source: Wall Street See
Author: Zhang Yaqi.

Last week, the Federal Reserve announced a 50 basis point rate cut, is such a large rate cut too aggressive? A series of economic data released this week will capture clues to the future economic trends.

On Thursday, the final annualized quarterly rate of actual GDP for the second quarter and the Core PCE Price Index for the second quarter in the United States will be released. The former will become an important reference for measuring the performance of the U.S. economy, while the latter is the Federal Reserve's preferred inflation indicator.

In addition, at least eight Federal Reserve officials, including Powell, Vice Chairman of the Federal Reserve for Supervision Michael Barr, and New York Federal Reserve President John Williams, plan to give speeches on Thursday. Their speeches may capture key information about future Fed rate cuts.

What is the next step for the Federal Reserve? The market closely watches the release of key data.

Although the decision to cut interest rates by 50 basis points boosted the stock market, especially the S&P 500 Index and Dow Jones Industrial Average both rose last week, the market's joy did not last long. Concerns about economic growth are gradually emerging among investors.

Although price pressures are easing, Powell's remarks last week remained cautious, stating, "The fight against inflation is not yet won".

Is the US economy still strong? Investors will focus on the upcoming GDP and PCE economic data.

At the same time, several Federal Reserve officials will give speeches this week. The market expects two more rate cuts this year, each by 25 basis points. The possibility of further rate cuts in 2025 is also being discussed.

It is worth noting that despite the declining inflation risks, Powell warned that the slowing labor market could become a new challenge. Analysts expect the PCE data to grow by 2.3% year-on-year, which is lower than the 2.5% increase last month. If this data further decreases, it will support the Fed's decision to cut rates.

Furthermore, with increased uncertainty in the economic outlook, especially the potential impact of the US presidential election, the market is concerned that premature loose policies may weaken the Fed's ability to achieve the 2% inflation target.

Regarding technology stocks, aside from Nvidia, last week the Mag7 all recorded gains. Due to interest rate sensitivity, investors closely monitor the Fed's policy changes to evaluate their impact on future growth.

This week, the Fed will continue to face a dual test from economic data and the market. Whether the pace of rate cuts is appropriate still remains to be seen.

Editor/Jeffy