Are there any variables in the Fed's interest rate cut in September?

1. In the July FOMC statement, the Fed mentioned for the first time that it was concerned about the risks faced by the dual mission, that is, it believed that current inflation was no longer the main risk facing the US economy, and the monetary policy target had shifted.

2. At the press conference, Powell's overall attitude was neutral. Although the September interest rate cut had entered the scope of discussion, he still had reservations about the timing of the interest rate cut and was unwilling to release the signal that the September interest rate cut was a done deal.

3. Several statements are worth noting:

1) It stated that the current economy is approaching the requirement for interest rate cuts, and there may be interest rate cuts as early as the September meeting;

2) It emphasized the overall observation of data and did not make decisions based on 1-2 single data points;

3) The labor market has normalized, that is, strong but not overheated;

4) It stated that the Fed's decision-making is not affected by the election in response to Trump's request not to cut interest rates before November.

The Fed may be inclined to make the first interest rate cut in September, but it is not in a hurry to confirm in the short term, and there are also concerns about the September interest rate cut. The current market has fully priced in the September rate cut. Considering the great impact of financial markets on the US economy, whether this will lead to changes in the direction of US employment and inflation is worth paying attention to. Based on historical experience, we believe that we can pay close attention to the Jackson Hole meeting on August 22, when Powell is likely to elaborate on the conditions and path of the Fed's rate cut. The US stock market experienced a certain correction in the early stage. After this meeting, the US stock market and gold both rose sharply, and the 10-year US Treasury bond fell to around 4%. The CME market shows that there will be three interest rate cuts in 2024. With such aggressive pricing, there is a high probability that there will be a considerable risk of a correction in the future.