The U.S. CPI data for June was unexpectedly weak, and the market's expectations for a rate cut have become stronger, increasing bets that the Federal Reserve will cut interest rates in September.
Data showed that the year-on-year growth rate of core CPI in June dropped to 3.3%, the lowest growth rate in more than three years - the continued steady downward trend of inflation means that interest rate cuts must be put on the agenda as soon as possible.
In fact, before September 18, the Federal Reserve also had an interest rate meeting on July 31. According to Fedwatch, the market is betting that the Fed's chances of cutting interest rates in July are only 6.7%.
Since there are such strong reasons for lowering interest rates, why wait until September?
Some believe that the Fed's decision to wait until September to cut interest rates is procedural rather than economic.
There are less than three weeks until the end of July meeting, which means the Fed has little time to prepare for a rate cut in an orderly manner. But if the Fed waits until September to cut interest rates, the U.S. economy may face more downside risks.
Some market analysts are concerned that if the Fed delays rate cuts for too long, the U.S. economy could face the risk of recession. The poor reaction of the U.S. stock market to CPI data overnight is an example.
Federal Reserve Chairman Powell also said at a congressional hearing this week that the labor market is cooling, which on the one hand weakens the upward momentum of inflation, and on the other hand brings uncertainty to the economic outlook.
There are also signs that the high interest rate environment is continuing to suppress the role of consumption in driving the economy.
According to previous reports, U.S. consumer companies are constantly issuing warnings that the purchasing power of American consumers has reached its limit. Consumer giant PepsiCo even attributed weak sales to long-term inflation accumulation and high borrowing costs.
Therefore, some people speculate that from now until September, the Fed may frequently "release dovish" policies, which is good for the bond market. #美国6月CPI大幅降温 #TON
