Core Viewpoint - The Federal Reserve Chairman Jerome Powell indicated that the current interest rate levels are sufficient to address the ongoing uncertainties related to tariffs and inflation, dampening market expectations for a rate cut in September [3][4]. Summary by Sections Federal Reserve's Decision - The Federal Open Market Committee (FOMC) voted 9-2 to maintain the federal funds rate in the range of 4.25%-4.5%, continuing the decision from previous meetings this year [4][6]. - The dissenting votes from Governors Waller and Bowman marked the first instance since 1993 where two governors opposed the committee's decision [9]. Market Reactions - Following Powell's remarks, traders reduced their bets on a rate cut, with the probability of a September cut dropping from about 60% to nearly 50%, and the October cut probability falling to approximately 85% [4][5]. - The U.S. dollar surged to its highest level since May, while the S&P 500 index declined, and gold prices fell to a one-month low due to panic selling triggered by the dollar's rapid appreciation [5][10]. Economic Assessment - Powell acknowledged a slowdown in consumer spending but emphasized that consumers remain in a "robust state" [6]. - The FOMC downgraded its assessment of the U.S. economy, stating that recent indicators show a slowdown in economic activity growth during the first half of the year [7][8]. - The committee maintained that the labor market is "strong" and inflation remains "elevated," while reiterating that uncertainties are still high [8]. Future Outlook - Several policymakers believe the Fed should pause rate cuts to assess the impact of tariffs on inflation, with a consensus that the current economic performance does not reflect undue pressure from restrictive policies [6][10]. - The upcoming economic data will be crucial, as a lower-than-expected inflation from tariffs or signs of labor market weakness could lead the Fed to resume easing in the fall [10].

Core Viewpoint - The debate over whether the Federal Reserve will cut interest rates in September is intensifying, with differing opinions on the conditions for such a move [1][8]. Group 1: Conditions for Rate Cut - Analysts from CICC believe that the conditions for the Federal Reserve to take action are maturing, arguing that a rate cut does not need to wait for a clear decline in inflation data [2][3]. - Current U.S. real interest rates at 1.63% are significantly higher than the natural rate of about 1%, indicating a restrictive monetary policy that could necessitate a rate cut [2][3]. - Economic growth and employment indicators are showing signs of moderate weakening, with the average growth rate over the past two quarters being around 1.5% when excluding tariff-related fluctuations [2][3]. Group 2: Tariff Impact on Inflation - The impact of tariffs on inflation is becoming clearer, with recent agreements with multiple trade partners leading to a more predictable path for inflation [3][6]. - Effective tariff rates are expected to stabilize around 15%-16% after August 1, which will primarily affect inflation in the third and fourth quarters, with year-end CPI projected at 3.3% and core CPI at 3.4% [3][6]. - The misconception in the market is that the Federal Reserve must wait for inflation to decline before cutting rates, but if the tariff impact is understood as "one-time," the Fed could act sooner [3][6]. Group 3: Federal Reserve's Independence - CICC analysts argue that the Federal Reserve is unlikely to cut rates due to political pressure from President Trump, emphasizing the Fed's commitment to its independence [8][9]. - Recent statements from Fed Chair Powell and other officials indicate a preference for maintaining a tightening stance, citing unresolved inflation risks from tariffs and a stable labor market [8][9]. - The Fed's decision-making process involves a committee of 12 members, making it difficult for any single political figure to significantly alter the policy direction [8][9].

Core Viewpoint - The potential increase in tariffs on August 1 may create pressure on the Federal Reserve, leading to hesitation in their upcoming meeting [1] Group 1: Economic Outlook - The Federal Reserve's meeting minutes indicate that officials expressed constructive views on the economy during the June meeting, feeling reassured about the economic outlook compared to the high tariffs announced in April [1] - Participants in the meeting unanimously agreed that the risks of rising inflation and weakening labor market conditions have decreased, although they remain at elevated levels [1] Group 2: Tariff Impact - The anticipated path of tariffs is lower, and recent data on inflation and inflation expectations has been encouraging [1] - The upcoming tariff increase on August 1 is expected to complicate the Federal Reserve's decision-making process in their meeting later this month [1]