Core Viewpoint - The probability of further interest rate cuts in China within the year remains low, primarily due to three key reasons [1][2][3]. Group 1: Impact of Federal Reserve's Actions - The logic behind the Federal Reserve's rate cuts opening up space for domestic rate cuts hinges on the pressure for RMB depreciation. Since mid-April, the RMB has strengthened, indicating that external factors like US Treasury yields and the dollar index are not trending downwards. The recent dovish stance from Powell is more about favorable external interest differentials rather than alleviating depreciation pressure [1]. - The relationship between external exchange rates and internal interest rates is viewed as a one-way logic, where significant depreciation pressure may allow for rate cuts, but a strong RMB does not necessarily lead to domestic rate cuts [1]. Group 2: Focus on Economic Stability and Financial Risk - Currently, the focus on exchange rates in rate cut decisions is relatively limited, with more emphasis on stabilizing growth and preventing financial risks. The monetary policy report from Q2 maintains a consistent stance on keeping the exchange rate stable [2]. - Historical context shows that the only time the exchange rate significantly constrained domestic rate cuts was from late 2024 to early 2025, where expectations for cuts were high but ultimately unmet due to market dynamics [2]. Group 3: Structural and Targeted Monetary Policy - The central bank's approach to "cost reduction" is becoming more structural and targeted, reducing the necessity for broad rate cuts. The current strategy emphasizes the use of structural tools and prioritizes quality over quantity in credit allocation [3]. - Even if external or internal factors trigger a rate cut, liquidity may not significantly loosen. For short-term funds, a 10 basis point cut may be the lower limit, while for long-term funds, rate cuts aimed at stabilizing the exchange rate or supporting the stock market may not lead to significant declines in long-term interest rates [3].

Report Industry Investment Rating - Not provided Core Views - The Fed has shifted to a dovish stance. In the short term, it has signaled a clear intention to cut interest rates in September. Powell believes that under restrictive policies, the balance of risks has been broken, and the risk of a downward trend in the labor market has increased. The inflation increase caused by tariffs is one - time, greatly increasing the possibility of a September interest rate cut. In the long term, the Fed's monetary policy emphasizes employment more, and the framework has returned to before 2020 [1]. - The macro - strategy is to increase risk appetite in the short term. Attention should be paid to the risks before the Fed's balance - sheet policy changes. Different asset strategies are proposed for dollars, US Treasuries, Chinese bonds, and commodities [2]. Summary by Related Catalogs Fed's Dovish Shift - The Fed's short - term signal for a September rate cut is due to the labor market's downward risk and the one - time nature of tariff - induced inflation. In the long term, the new monetary policy framework has removed descriptions of the zero - lower bound and average inflation target, and changed the description of employment from "shortfall" to "deviation", emphasizing the importance of the labor market [1]. Macro - strategy - **Dollars**: Short - term risk appetite in the market has increased. Short - term volatility long positions (+VIX) should be stopped and observed. Attention should be paid to the pressure on non - US assets from the increased risk appetite for US dollar assets, and continue to short the euro against the US dollar on rallies (-EUR) [2]. - **US Treasuries**: Maintain the flexibility of US dollar assets. It is expected that the yield curve will steepen as risk appetite increases (-2s10s). In terms of trends, pay attention to the impact of August non - farm payrolls on the Fed's September rate - cut pricing (+2s) [2]. - **Chinese Bonds**: Hold strategic steepening positions (+2s10s). Temporarily pay attention to the short - term pressure on non - US curve structures after the implementation of the Fed's new monetary policy framework. Keep the judgment of being bearish on T and TL (due to fiscal expansion) but not short - selling (due to short - term risk uncertainty), and pay attention to the opportunities provided by the August US non - farm payroll report [2]. - **Commodities**: Against the backdrop of the Fed's improved liquidity expectations, the expected weakening of total demand due to employment risks and the expected weakening of total supply due to anti - involution policies. Pay attention to the strengthening of the differentiation between domestic and foreign commodities in the short term under the improved risk - appetite state. Increase domestic - demand industrial products such as black and chemical products, and reduce external - demand industrial products such as energy and copper. In the long run, pay attention to the allocation opportunities of external - demand industrial commodities after adjustments [2]. Market Data and Trends - As of August 23, the market's pricing of the probability of a Fed rate cut within the year remained at 83.9%, and there was no significant increase in August. The market may be waiting for further signals from the early - September non - farm payroll report. The probability of the Fed continuing to cut rates during Powell's tenure in the first half of 2026 was 58.3%, slightly higher than 50% [6][8]. - The global major central banks have been in a rate - cut state in the past three months. The relatively loose financial conditions have led to the expectation of the Fed's continued loose monetary policy, driving the improvement of market risk appetite, and the pressure on the relatively high - level US stocks may be postponed in the short term [14][18][19]. Strategy Tracking - The table shows the tracking of the Fed's trading macro - strategies from July 25 to August 25, including strategies for dollars, US Treasuries, and Chinese bonds, such as holding, short - selling, and stop - loss operations [22]. Labor Market - The growth rate of the US labor market stock is continuing to slow down, and the incremental data from the private - sector survey of the labor market is also facing downward pressure. Attention should be paid to the September non - farm payroll report [23][24][21].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - A-shares are expected to maintain a high-risk preference, and investment opportunities in innovative drugs, artificial intelligence, and rare earths are favored [12]. - Bond market yields may continue to fluctuate within a narrow range at a low level [12]. - In the context of the Fed's dovish stance, gold has the possibility to break through its previous high [12]. 3. Summary by Related Catalogs Stock Market Performance - U.S. stocks rose, with the Nasdaq, S&P 500, and Dow Jones Industrial Average changing by 3.87%, 2.43%, and 1.35% respectively. The Nasdaq China Technology Index changed by 4.25%, and the Hang Seng Index changed by 1.43% [2]. - A-shares generally rose, with the Wind All A Index rising 1.94%. Most major indices showed positive changes, and most sectors and industries also rose, with non-ferrous metals, machinery, and national defense and military industry leading the gains [3][4]. Bond Market Performance - Interest rate bond prices rose, and the yield curve steepened. The 10-year Treasury bond futures contract rose 0.19%, and the yield of the 10-year Treasury bond active bond decreased by 1.68 BP [5]. - Bond market leverage increased, and the central bank's open market operations had a net withdrawal of 536.5 billion yuan [6][8]. - U.S. Treasury yields increased, and the curve shifted upward as a whole [9]. Foreign Exchange and Commodity Markets - The U.S. dollar depreciated, and the U.S. dollar index decreased by 0.43%. Gold prices rose, with London gold spot prices rising 1.49% and COMEX gold futures prices rising 1.29% [10]. Fed's Stance - The Fed's regulatory vice-chairman's remarks were more dovish than the market's mainstream expectations, and the market's mainstream expectation for the number of Fed rate cuts in 2025 remains 2 times [11].

Group 1 - The core viewpoint is that despite the recent strengthening of the US dollar, it may face challenges due to potential dovish shifts from the Federal Reserve, which could lead to a faster-than-expected rate cut [1][2] - Standard Chartered Bank indicates that the recent weakness of the dollar may reflect market relief that the worst outcomes from trade negotiations are unlikely to occur, but attention is now shifting to the Federal Reserve [1][3] - Market expectations for the upcoming Federal Open Market Committee (FOMC) meeting are low, with no rate cuts priced in for July and only a 16 basis point cut anticipated for September [1][2] Group 2 - The divergence among FOMC members has narrowed, focusing primarily on the impact of tariffs, with some members advocating for ignoring temporary price increases while others, including Chairman Powell, suggest that the Fed could have been more accommodative without tariffs [2] - Economic data, particularly the upcoming employment report, is expected to become a focal point, with Standard Chartered warning that downside risks may outweigh consensus expectations [3] - The dollar is expected to weaken moderately over the next few months, but significant declines will depend more on actual shifts in Federal Reserve policy rather than further trade negotiation news [3]

Summary of Conference Call Records Industry or Company Involved - The discussion primarily revolves around the Federal Reserve's monetary policy decisions and the implications of financial pressure on the U.S. economy. Core Points and Arguments - Current U.S. economy may be in a state of stagflation, with upcoming CPI data and Q2 results likely leaning towards inflation, indicating significant financial pressure that could influence Federal Reserve decisions [1][2] - Financial pressure index is a crucial measure of financing conditions, default risk, and risk appetite, impacting economic conditions through short-term interest rates affecting long-term rates, which is a key focus for the Federal Reserve [1][3] - Financial market volatility can deteriorate consumer spending willingness, and tightening financial conditions may affect manufacturing investment [1][4] - Historical events over the past decade, such as China's economic slowdown and unexpected rate hikes by the Federal Reserve, have led to increased financial pressure, prompting a dovish shift in policy [1][5][6][7][8] - The Federal Reserve is expected to consider rate cuts in July, October, and December, with a higher probability of a cut in July, influenced by stock market pressures or issues with real interest rates [1][11] Other Important but Possibly Overlooked Content - The impact of tariffs on inflation is often temporary, and the Federal Reserve is likely to focus more on economic downturn risks rather than inflationary pressures [1][4] - The financial pressure index reflects the overall economic stability, and its increase has historically signaled a shift towards dovish policies by the Federal Reserve [1][9] - The Federal Reserve's past policy adjustments, including a significant rate hike in 2018 that led to a 20% drop in the stock market, illustrate the delicate balance between monetary policy and market stability [1][10] - Future predictions for 2025 suggest a shift from stagflation risks to economic weakness risks, with potential rate cuts anticipated based on market conditions and economic data [1][11][12]

Core Viewpoint - The article discusses the potential impact of tariffs on inflation and the Federal Reserve's interest rate decisions, highlighting a divergence in market expectations regarding rate cuts in 2025 due to financial pressures and the risk of stagflation [1][5]. Group 1: Financial Pressure as a Key Factor - In a stagflation environment, the Federal Reserve faces challenges in balancing its dual mandate, with financial pressure emerging as a primary concern [2][48]. - The economic effects of tariffs are contributing to stagflation, as indicated by manufacturing PMI and short-term inflation expectations, suggesting that stagflation risks are increasing [2][48]. - The Federal Reserve's recent stance indicates a preference for a reactive approach rather than a preemptive one, focusing on the economic impact of tariffs and uncertainty in the economic outlook [7][48]. Group 2: Impact of Financial Pressure on Decision-Making - Sustained financial pressure may lead the Federal Reserve to consider policy adjustments, as rising financial pressure often signals economic downturn expectations [3][24]. - Historical instances show that rising financial pressure has been a significant condition for the Federal Reserve to adopt a dovish stance, such as during the 2015-2016 period and the onset of the COVID-19 pandemic [3][28]. - The article emphasizes that financial conditions, including credit, valuation, and liquidity, are critical in assessing the overall financial pressure faced by the economy [24][25]. Group 3: Expectations for Rate Cuts in 2025 - The article anticipates that the Federal Reserve may initiate rate cuts in the third quarter of 2025, as the economic narrative shifts from stagflation to recession [4][35]. - The upcoming months will see market focus on the balance between inflation and economic slowdown, with expectations that if inflationary pressures ease while economic downturns persist, the Federal Reserve's primary concerns will shift accordingly [4][35]. - The probability of rate cuts may decrease if financial markets remain stable, but overall financial pressures are expected to trend upward, paving the way for potential rate cuts later in the year [4][35].