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New Federal Reserve News Agency: Finally, the Federal Reserve will discuss interest rate cuts, and September is very likely!
After more than a year of high interest rates, the Fed will begin to pave the way for a rate cut.
On Thursday, the Federal Reserve will announce its interest rate decision. Nick Timiraos, a well-known financial journalist known as the "New Federal Reserve News Agency", thinks:
Although it is unlikely to adjust interest rates at the upcoming meeting, this meeting will undoubtedly be the most influential one in the near future.
As inflationary pressures gradually ease and the labor market shows signs of cooling, Fed officials will weigh various factors at this week's meeting.
It is widely expected that although it is unlikely to cut interest rates in July, officials will signal a rate cut after the meeting to prepare for the policy shift in September.
For a long time, Federal Reserve Chairman Powell has been weighing the risks of cutting interest rates too early and too late. Now the changes in the economic situation seem to have turned to support earlier action. Timiraos said that the Fed's recent interest rate cut reflects three factors: the improvement in inflation, the signs of cooling in the labor market, and the changing risk considerations of allowing inflation to remain too high and causing unnecessary economic weakness.
Inflation continued to improve.
The continuous improvement of inflation data is one of the key factors to promote the change of Fed's attitude.
According to the latest data, the core CPI excluding food and energy dropped significantly from 4.3% a year ago to 2.6% in June, a sharp drop from the peak of 5.6% two years ago.
Williams, president of the Federal Reserve Bank of new york, said:
The downward trend of inflation is extensive and persistent, and he thinks that the "last mile" of inflation is actually not so difficult. Different inflation indicators are developing in the right direction and are quite consistent.
Labor market cooling
The signs of cooling in the labor market also provide the Fed with more policy flexibility.
The unemployment rate rose slightly from 3.7% at the end of last year to 4.1% in June, mainly due to the slowdown in recruitment activities and the prolonged time for job seekers to find jobs. This trend limits workers' ability to negotiate a large salary increase, thus reducing inflationary pressure.
Powell recently pointed out that the labor market is no longer the source of widespread inflationary pressure, which shows that the Fed's major concern about inflation rebound has subsided.
Christopher Waller, governor of the Federal Reserve, is one of the most active supporters of this argument. In a recent speech, he said:
At present, the labor market is at its best, and we need to keep it at its best.
Risk considerations have changed.
In addition, Timiraos believes that the risk management considerations faced by Fed officials are also changing, from worrying about the risk of rising inflation to worrying about rising unemployment.
Chicago Federal Reserve Bank President Goodspeed stressed:
The current interest rate level was set when the inflation rate exceeded 4%, but now the inflation rate has dropped to about 2.5%. This means that the actual tightening degree of monetary policy has increased significantly. There is no need to maintain such a high restrictive interest rate level without signs of overheating in the economy.
Federal reserve bank of san francisco Governor Daley warned:
If you don't cut interest rates in time when the labor market begins to decline, it will be very difficult to get the economy back on track, which is completely different from the delay in raising interest rates two years ago.
Risk warning and exemption clause
The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.