The Fed is widely expected to cut interest rates by 25 basis points at its monetary policy-making meetings on July 30 and July 31, local time. However, the Fed's monetary policy, which has always been independent, has been challenged, especially by the tweet-loving US president.
At a time when inflation is very low, the Fed is still doing nothing to resist loosening monetary policy in countries such as Europe, Trump said. "the Fed's interest rates are 'raised' too early, too much. A small cut in interest rates is not enough. "
According to CME Fed Watch, the probability of the Fed cutting interest rates by 25 basis points to 2.00% 2.25% in July is 76%, the probability of cutting interest rates by 50 basis points is 24%, and the probability of cutting interest rates by 25 basis points to 2.00% 2.25% in September is 27.8%. The probability of cutting interest rates by 50 basis points and 75 basis points is 57 per cent and 15.2 per cent, respectively.
According to the survey, 2/3 of the analysts surveyed expected the Fed to cut interest rates by 25 basis points this time, while about 1/3 expected interest rates to remain unchanged, while a small number expected a rate cut of 50 basis points. The market has digested expectations of a rate cut of about 30 basis points, a 25 basis point cut plus a possible 50 basis point cut of 1/4.
All the signs are realistic. The probability of the Fed cutting interest rates by 25 basis points this time is very high because the US economy is not particularly poor, especially the US GDP data released on Friday, which also exceeded market expectations.
The US reported on Friday that GDP grew at an annualised rate of 2.1 per cent in the second quarter, beating expectations of 1.8 per cent.
However, an important indicator of the US, the 10-year Treasury yield and the three-month Treasury yield, has already been pegged upside down, and the US economy will have a recession in the coming year after the yield is hung upside down. As a result, the Fed is widely expected to take steps to prevent interest rate cuts.
As the Fed's end-of-month meeting approached, the market swayed from a 50 basis point to a 25 basis point rate cut to a stable rate cut of around 25 basis points.
Trump clearly doesn't think that's enough. He thinks the Fed needs to cut interest rates more to prevent a recession, suggesting a 50 basis point cut. In addition, the U. S. president has been unhappy with Fed Chairman Powell's approach, and wants to put new people into the Fed.
Judging from the market reaction, everyone has turned a blind eye to Trump's demands, which is his usual style.
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