Tonight, the financial market will usher in three key events:
First, the CPI data will be released at 8:30, followed by the Fed's interest rate decision and economic outlook overview at 2 a.m., and at 2:30 a.m., Powell's speech will put an end to this series of events. Although these events are independent of each other, they are closely linked to each other and together constitute the main theme of the financial market tonight.
When it comes to CPI data, we need to clearly distinguish its different dimensions, including annual rate, monthly rate, month-on-month and year-on-year. The media and the market often seize the abnormal fluctuations of a certain data for speculation, but we need to look at it comprehensively and rationally. I personally expect to see an ideal 3.3% annual rate and 0.1% monthly rate data, which will show that inflation is being alleviated and pave the way for interest rate cuts.
However, if the CPI data does not meet our expectations, the market may temporarily wait and see, waiting for the guidance of the dot plot, just like when the ADP data was released on June 5.
Next is the Fed's interest rate decision. It is expected that the interest rate will remain at 5.25%-5.5% this month, but the market is more concerned about the interest rate cut guidance conveyed by the dot plot. As a summary of the opinions of the Fed's voting committee, the dot plot will become a key basis for the market to judge the number and intensity of future interest rate cuts.
In tonight's game, there are two key points worth paying attention to. The first is the time of the first cut. Although the Fed has the intention to cut interest rates, it has not been able to find the right time. With the missed best interest rate cut window in May and June, the market's expectations and pressure on Powell are also increasing. In the future, if there is a problem with the US economy, Powell may become the scapegoat. Therefore, he hopes to cut interest rates as soon as possible more than anyone else. We may see a sudden announcement of an emergency interest rate cut one day before September to break the market's expected consistency.
The second is the number and intensity of interest rate cuts. The Fed will hold 8 meetings this year and publish dot plots and economic forecasts at 4 of them. The dot plot will become an important reference for the market to judge the path of interest rate cuts. In the case of the expected first cut in September, the market will pay attention to whether there will be 1, 2 or 3 interest rate cuts this year, and whether the policy is hawkish, dovish or neutral. This will directly affect the market's ups and downs and sideways trends.
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