Core Viewpoint - The Federal Reserve Chairman Jerome Powell indicated that despite current inflation risks, the Fed may consider interest rate cuts in the coming months [1] Economic Outlook - Short-term inflation risks in the U.S. are skewed upwards, while employment risks are increasing, presenting a challenging situation [1] - The U.S. economic growth slowed to 1.2% in the first half of the year, approximately half of the expected growth rate for the same period in 2024, largely due to a slowdown in consumer spending [1] Monetary Policy - The Fed's monetary policy is not on a preset path; decisions will be based entirely on data assessments and their implications for economic outlook and risk balance [1] - The tightening policy context may require adjustments based on changes in economic prospects and risk balance [1] Market Reaction - Financial markets reacted positively to Powell's speech, with all three major U.S. stock indices rising over 1%, the dollar index falling by 0.8%, and the 10-year U.S. Treasury yield dropping by over 7.5 basis points to 4.256% [1]

Group 1 - The core viewpoint of the Federal Reserve's recent meeting minutes indicates that most officials are more concerned about inflation risks than employment market issues [1] - The July meeting resulted in a vote of 9 in favor and 2 against maintaining interest rates, marking the first time since late 1993 that two officials opposed the rate decision [1] - The minutes suggest a clear "hawkish" policy stance, which diminishes market expectations for a rate cut in the near term [1] Group 2 - Since August, expectations for a Federal Reserve rate cut have been frequently adjusted, particularly following disappointing non-farm employment data [2] - Recent inflation data, including the Producer Price Index (PPI), has shown unexpected increases, leading to a tightening of rate cut expectations [2] - As of August 21, market odds for a 25 basis point rate cut in September were at 81.2%, down from 92.1% a week prior, indicating fluctuating market sentiment [2]

Group 1 - The core viewpoint of the article is that the market's expectation for interest rate cuts has significantly cooled following the July FOMC meeting, with indications that a rate cut in September is unlikely [2][4][8] - The FOMC has maintained the federal funds target rate at 4.25%-4.50% for the fifth consecutive meeting, which aligns with market expectations, but internal divisions within the Fed have increased, with two members supporting a 25 basis point cut [2][15][16] - The statement regarding economic growth has softened, indicating a slowdown in economic activity during the first half of the year, contrasting with previous assessments of robust expansion [2][16][17] Group 2 - Powell's press conference reflected a relatively neutral stance, acknowledging a slowdown in consumer spending while indicating that consumer conditions remain healthy [3][18][20] - The labor market is described as stable, with wage growth approaching sustainable long-term levels, although the unemployment rate's stability is partly due to synchronized declines in labor supply and demand [3][18][20] - Inflation dynamics have shifted, with service sector inflation decreasing while goods inflation is rising, influenced by tariffs and the gradual impact of restrictive monetary policy [3][20][21] Group 3 - Market expectations for rate cuts have decreased, with implied cuts for the year dropping from 1.848 to 1.445 times, and the probability of a September cut falling from 68% to 47% [4][21] - The dollar index has risen, and the yield on ten-year U.S. Treasury bonds has increased, reflecting a market interpretation of Powell's statements as leaning towards a hawkish stance [4][21] - The article suggests that political pressure is not a significant factor influencing the Fed's decisions, as Powell has maintained the Fed's independence despite external pressures [5][11][12]

Group 1: Federal Reserve Decisions - The Federal Reserve decided to maintain the benchmark interest rate in the range of 4.25%-4.5%[3] - Two Federal Reserve governors voted against the decision, advocating for a 25 basis point rate cut[6] - The assessment of economic conditions was downgraded to "growth of economic activity moderated" from "expand at a solid pace"[6] Group 2: Economic Indicators - Non-farm payrolls increased by 147,000 in June, with half of the new jobs contributed by the government, indicating a slowdown in private sector job growth[7] - The labor force participation rate has declined, and wage growth is slowing, suggesting a weakening labor market[11] - Consumer spending may have started to decline, with Q2 private domestic final purchases showing the lowest annualized growth rate since Q1 2023[13] Group 3: Inflation and Market Reactions - Inflation showed signs of rebounding in June, driven by rising energy and core commodity prices, while core services inflation remained stable[11] - Following the press conference, the market's expectation for a September rate cut dropped from over 60% to below 50%[14] - The uncertainty surrounding economic prospects remains high, with short-term inflation risks persisting due to tariff policies[14] Group 4: Risks and Outlook - Risks include potential unexpected increases in U.S. inflation, tighter monetary policy from the Federal Reserve, and greater-than-expected economic downturns[15] - The overall economic outlook suggests continued slowing growth in the U.S. economy, influenced by policy and economic uncertainties[13]

Group 1: Federal Reserve Meeting Insights - The Federal Reserve maintained the federal funds target rate in the range of 4.25-4.50%, aligning with market expectations[2] - The balance sheet reduction pace remains unchanged at $5 billion in Treasury securities and $35 billion in MBS monthly[2] - The statement highlighted increased economic uncertainty, with three key adjustments made to previous language regarding economic activity and net exports[2] Group 2: Market Reactions and Economic Indicators - Market sentiment turned hawkish, with the 10-year Treasury yield initially dropping before rising, and the S&P 500 index reversing gains[2] - July's ADP employment report showed an increase of 104,000 jobs, exceeding the expected 76,000[8] - The second quarter GDP growth rate was reported at 3.0%, surpassing the market expectation of 2.6%[8] Group 3: Inflation and Tariff Impacts - Powell indicated that tariffs have a slower-than-expected impact on inflation, with core PCE expected to be 2.5% and 2.7% respectively[2] - Data from Cavallo et al. (2025) shows that U.S. import prices are rising faster than domestic prices, with significant increases in prices of goods imported from China[8] - A majority of businesses plan to pass on tariff costs to consumers within three months, indicating a potential rise in consumer prices[8] Group 4: Future Outlook and Risks - The Fed's reluctance to provide guidance on a potential September rate cut reflects a cautious stance amid economic uncertainties[8] - Risks include high uncertainty surrounding U.S. tariff policies and their impact on inflation, as well as potential downward pressure on employment exceeding expectations[8]

Group 1: Federal Reserve Policy Outlook - The Federal Reserve's upcoming meeting on July 29-30 is expected to maintain current interest rates, with a near-zero probability of a rate cut in July and less than 60% for September, primarily due to the recent CPI data indicating the inflation effects of tariffs [1] - Recent comments from Fed officials suggest a potential shift in policy considerations, with some members supporting a rate cut while others advocate for maintaining current rates due to rising inflation concerns from tariffs [1][2] - The uncertainty surrounding U.S. tariff policies is diminishing, as recent agreements with Japan and the EU suggest a potential stabilization of tariff levels, which could reduce the Fed's concerns regarding inflation and influence their decision-making [2] Group 2: Inflation Trends - Current inflation levels in the U.S. are not showing significant increases, with the June CPI data indicating a projected PCE inflation growth of 2.5% year-on-year, and core PCE at 2.7% [3] - Research indicates that excluding tariff impacts, U.S. inflation has been close to the Fed's 2% target, suggesting that the inflationary pressure from tariffs may not be as significant as previously thought [3] - If consumers absorb one-third of the new tariffs, a permanent 10% increase in tariffs could raise PCE inflation by 0.3 percentage points this year, but this effect is expected to dissipate by next year [3] Group 3: Employment and Economic Growth - Recent employment data shows signs of weakness, with only 147,000 new jobs added in June, primarily from government sectors, while private sector job growth appears stagnant [4] - The private sector's employment situation is critical for understanding economic momentum, and recent adjustments suggest that previous job growth figures may have been overestimated [4] - Economic indicators such as retail sales and PMI show stability, but sectors sensitive to interest rates, like manufacturing and real estate, are experiencing contraction, indicating a need for potential rate cuts to stimulate consumer spending [4] Group 4: Market Sentiment and Fed Independence - There is growing concern regarding the independence of the Federal Reserve, especially with external pressures from the Trump administration advocating for rate cuts [5] - A rate cut in July could be perceived as yielding to political pressure, while a refusal to cut rates when appropriate could undermine the Fed's independence [5] - The possibility of postponing a rate cut until September is being considered by some FOMC members, reflecting a cautious approach to monetary policy [5]