The U.S. CPI data for July showed that inflation levels slowed down and rose year-on-year

2.9%, which is the first time it has fallen back to the "2" digit since March 2021, and it has fallen for the fourth consecutive month, which is in line with market expectations. However, the market's reaction to this is a decline, mainly due to the following reasons:

Expectation adjustment: The market has already expected inflation to cool down, and the release of CPI data did not bring any new positive factors, causing investors to choose to take profits. I don’t want to play with you anymore.

Recession concerns: Despite the positive CPI data, market concerns about a recession have not diminished. Financial institutions’ models show that the risk of a recession has risen, adding to market uncertainty.

Technical adjustment: The market may experience a technical correction after a continuous rise, especially when investors are uncertain about the future economic and policy direction. In summary, the July CPI data paved the way for the September rate cut, and there was no unexpected rate cut in September. The probability of a 25BP rate cut is 60%. Although the CPI data released a positive signal of slowing inflation, investors are concerned about the uncertainty of the economic outlook and policy changes. Therefore, under the combined effect of expectation adjustments, recession concerns and technical adjustments, the market fell.

Federal Reserve Interest Rate Monitor·Federal Reserve Rate Hike and Rate Cut Probability Forecast

US interest rate decision September 19, 2024.

Our Fed Rate Observer is based on 30-day Fed Funds futures prices, which represent market expectations of the likelihood of interest rate changes in the Federal Reserve's monetary policy. The Observer allows users to calculate the probability of a Fed rate hike at the next meeting.

September 19, 2024