The CPI data is out, what should we do? What does it mean for interest rate cuts?
Looking at the data itself, both the basic and core CPI were slightly below expectations, which is exactly what the Fed wants to see. Inflation is on a downward trajectory, and over the next two to three months, the CPI should fall back to the 2% range, so this is very good news, getting closer and closer to the Fed's 2% target.
So what does this mean for interest rates? First of all, I think it is impossible to cut interest rates in July. The Fed will not panic and there is no need to cut interest rates in July. The market expects a 70% chance of a rate cut in September, which I personally think is a bit high. Powell said he wants to see more monthly data, so this includes August's CPI and possibly September's non-farm payroll report. It is not impossible to cut interest rates in September, but the probability is not as high as 70%. The probability of a rate cut this year is higher than ever before. The US economy is gradually slowing down from overheating, accompanied by a decline in inflation, which is good news for all markets.
Finally, I will show you the internal model of long and short + 1 second escape operation.
