On Friday, former Secretary of the Treasury Summers, who blew the whistle on high inflation in the United States, said that the August non-farm payrolls report in the United States was not particularly bad, but it did make it more difficult to predict the extent to which the Federal Reserve may cut interest rates this month. Summers believes that the probability of the Federal Reserve cutting interest rates by either 50 basis points or 25 basis points at the September meeting is about the same. However, overall, the scale of the Federal Reserve's first interest rate cut is not important in the end.

Summers stated that Federal Reserve officials will closely monitor the development of the economic outlook and adjust policies to adapt to the situation. If the economy weakens significantly, they will cut interest rates significantly. If the economy does not weaken significantly, they may reduce interest rates by 25 basis points at each meeting.

The latest non-farm report from the United States has mixed results. The non-farm employment population in August increased by 0.142 million, lower than the expected 0.165 million, with revisions for July and June. The unemployment rate in August dropped from 4.3% in July to 4.2%, the first decline since March this year. The year-on-year and month-on-month wage increases in August were higher than market expectations and July.

Summers pointed out that these numbers certainly do not show any obvious weakness, but if you are concerned about the trend of recent statistical data, then they certainly do not provide you with evidence of economic health.

Summers currently expects that the United States will not fall into a recession. If this is indeed the case, then the financial markets have overestimated their expectations for the future easing policies of the Federal Reserve. The two-year U.S. Treasury bond yield fell to 3.59% on Friday, reaching its lowest level since the U.S. regional bank crisis in March 2023.

Editor/Emily