'Fast Money' traders discuss interest rate cut hopes, market rally

Market Expectations & Fed Policy - The market anticipates a hawkish rate cut in September, with interest rate-sensitive sectors like retail, home builders, and banks rallying on this expectation [2] - The market initially overreacted to dovish comments, overlooking broader market dynamics; a weaker dollar supports international markets, commodities, and multinationals [2] - The market may be prematurely pricing in an easing cycle beyond a single rate cut, given persistent goods inflation [10] - Prior to the speech, there was a 74% chance of a rate cut, which increased to 87%; this shift, though not drastic, significantly moved the market [10] - In May, the odds of a rate cut were zero, with the "higher for longer" narrative gaining traction [11] Inflation & Employment - Inflation remains a key concern for the Federal Reserve [1] - The Fed is balancing its mandates of stable pricing (inflation) and full employment, with recent jobs numbers raising concerns [4][5][8] - PPI data indicates ongoing goods inflation, though services inflation is balancing it out [10] Rate Cut & Neutral Rate - The Federal Reserve is expected to cut rates, with the key question being whether it will be 25 or 50 basis points [5] - Determining the neutral rate (estimated around 3% to 35%) is crucial for gauging how aggressively the Fed will cut rates to avoid inflationary or deflationary pressures [6] - The current Fed funds rate is approximately 43%, positioning it in the middle of the range [6]