Sou Hu Cai Jing·2025-08-16 01:59Core Viewpoint - The article discusses the turmoil in the financial markets triggered by President Trump's call for an immediate 300 basis point interest rate cut by the Federal Reserve, leading to significant market reactions and internal conflicts within the Fed [3][5][11]. Group 1: Market Reactions - Following Trump's announcement, the likelihood of Fed Chair Powell being dismissed surged from 16% to 26% within four hours, causing panic in the markets [5] - Gold prices increased by $20 per ounce, while the dollar index fell by 25 basis points [5] - Deutsche Bank warned that if Powell were to be removed, the dollar could drop by 3% and long-term U.S. Treasury yields could rise by 40 basis points [5] Group 2: Internal Fed Dynamics - The atmosphere within the Federal Open Market Committee (FOMC) was tense, with a rare public disagreement occurring as two members opposed the Chair's decision for the first time in over 30 years [8] - The final vote was 9-2 against a rate cut, highlighting deep divisions within the Fed regarding monetary policy direction [8] - The core Consumer Price Index (CPI) rose to 2.9%, significantly above the 2% target, driven by Trump's tariffs increasing consumer prices [8][9] Group 3: Economic Indicators - The second quarter GDP growth figures masked a decline in domestic demand growth to the lowest level in two and a half years [9] - Nearly 90% of businesses indicated they would pass on increased tariff costs to consumers, exacerbating inflation concerns [9] - The U.S. government faces a staggering $37 trillion in debt interest payments, with each 1% increase in rates costing an additional $360 billion annually [9] Group 4: Global Financial Landscape - In April, global central banks sold $36 billion worth of U.S. Treasuries, while accumulating 280 tons of gold, the highest in two decades [10] - The concept of "de-dollarization" is gaining traction, with countries like Brazil and regions like the EU and ASEAN exploring alternatives to the dollar [10] - The Dow Jones Industrial Average fell nearly 1%, while the Nasdaq Composite reached a historic high, indicating a split in market sentiment [10][13] Group 5: Future Outlook - The Fed's decision to maintain the benchmark interest rate at 4.25-4.5% was accompanied by a shift in focus towards trade policy impacts, omitting previous language suggesting possible rate cuts [11] - Market expectations for a rate cut in September stabilized at 62.6%, with speculation about a new Fed Chair potentially pushing for multiple cuts [13] - The upcoming non-farm payroll data is seen as critical, with warnings that a slowdown could trigger a new crisis for dollar dominance [13][14]