In the early hours of Tuesday morning Beijing time, Federal Reserve Chairman Powell will give a speech to the public. The market expects that this week, the top Fed officials will deeply analyze the trend of slowing inflation and weigh whether to release the intention of interest rate cuts.
The Federal Reserve is scheduled to hold an interest rate meeting from July 30 to 31. Following convention, policymakers need to remain silent on monetary policy from July 20 (this Saturday) to the first Friday after the meeting.
Given that the inflation rate is steadily approaching the target level of 2%, coupled with concerns about the resilience of the labor market under the Fed's tightening policy, the Fed may either indicate that a rate cut is coming or explain why the current data is not enough to support monetary policy easing in the last period before the meeting.
Citibank analysts predicted last Friday: "We predict that the Fed will send a clear signal in July that the rate cut cycle may start after this meeting. If the economic situation is in line with expectations, the rate cut may be implemented as early as September."
The Fed Observation Tool of CME Group shows that the weak inflation data in June has prompted the market to generally expect the probability of the Fed's rate cut in September to jump to more than 90%, and many large financial institutions have adjusted their rate cut expectations in advance.
The market generally believes that at the July interest rate meeting, the Fed will not adjust the benchmark interest rate range of 5.25% to 5.5% that has been maintained since July 2023. However, the latest weak inflation data may prompt the Fed to adjust the wording in its policy statement to implicitly indicate the possibility of a rate cut at the next meeting in September. Therefore, any public remarks by Fed officials this week will be closely watched by the market for insights into how the latest economic data shapes policymakers' decision-making considerations.
The US Consumer Price Index (CPI) in June continued to slow down, while the Producer Price Index (PPI) released last Friday revealed the easing of price pressures in areas such as medical care, which added new arguments for the possible loosening of monetary policy in the future.
Such good data has laid a solid foundation for interest rate cuts
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