The Fed expects to cut interest rates only once this year! Powell: Not confident enough to let go immediately! Bitcoin surges and plummets

The latest CPI (Consumer Price Index) data released by the U.S. Bureau of Labor Statistics last night showed that the CPI increased by 3.3% in May, lower than the market expectation of 3.4%, driving the rise of cryptocurrency and U.S. stock markets jumped.

But then, the U.S. Federal Reserve announced at 02:00 this morning that interest rates would remain unchanged in the range of 5.25% to 5.5%, the seventh consecutive freeze. Although it is in line with market expectations, the latest interest rate dot plot shows that Federal Reserve decision-makers seem to expect to cut interest rates only once this year. Nick Timiraos, a reporter known as the "Federal Reserve's mouthpiece", also interpreted that: There are 4 Fed policymakers Officials expect no rate cuts this year, up from two in March. Seven officials expect one rate cut this year, and eight officials expect two rate cuts. This means that a slim majority believes that the base case is for no more than one rate cut this year.

Fed interest rate dot plot

Inflation is slowing, but not enough to support interest rate cuts

Federal Reserve Chairman Jerome Powell Powell said at a press conference after the meeting that the May CPI was "undoubtedly a better inflation report than almost everyone expected." The data helped the Fed build confidence in inflation cooling, but it was not enough to support Cut interest rates.

Powell emphasized that recent inflation data have slowed down, but more good data is still needed to boost confidence in the anti-inflation process, and he will continue to pay close attention to inflation risks...This year So far, the Fed has not grown confident that inflation has slowed enough to cut interest rates.

In addition, the Federal Reserve generally expects that GDP growth will slow down from last year, and that although the pace of employment growth will be slower than in the first quarter, it will still be strong. It is expected that the labor market will continue to remain strong.

“The Fed is closely monitoring the labor market for signs of weakness, but has not yet seen such signs. It has noted a decline in job openings and wage growth, and a slight increase in the unemployment rate. This is an important According to the data, the overall situation is that the job market is strong, but it is cooling. "

Does not specify when the interest rate will be cut

As for when the interest rate will be cut, which is what the market is most concerned about? Powell said that no one among the FOMC members has made a strong commitment to the interest rate forecast. The Fed needs further confidence and more good inflation data, but will not specify when to start cutting interest rates.

In addition, Powell also mentioned that officials are gradually realizing that it is impossible to recreate the extremely low interest rate environment before the epidemic.

Can interest rates be cut in September?

After the CPI data was released last night, market bets on the chance of an interest rate cut as soon as September rose to over 70%. However, after the FOMC meeting ended and the dot plot showed that there would only be one interest rate cut this year, CME Group Fedwatch Data shows that the probability of launching the first interest rate cut in September and a 1-digit rate cut has dropped to 56.7%, the probability of keeping interest rates unchanged is 38.5%, and the probability of a 2-digit rate cut is 4.8%. The market’s estimate of the probability of an interest rate cut in September has been Lower than before.

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