US: Gradual interest rate cuts scheduled from September onwards
2024-08-23
■ FOMC meeting minutes show that most participants support interest rate cuts starting in September
■ If the main reason for the interest rate cut is the stability of the actual policy rate, then a gradual 0.25% interest rate cut will become the main scenario.
On the 21st, the Federal Open Market Committee (FOMC) released meeting minutes (July 30th and 31st meetings). At the FOMC meeting on July 30th and 31st, the statement's wording was revised from "maintaining high vigilance against the risk of rising prices" in June to "paying attention to the dual task of two aspects of risk." However, there have been no significant changes in policy guidelines, so this revision is not intended to predict an early interest rate cut. Instead, as Federal Reserve Chairman Powell stated at the FOMC post-meeting press conference, it reflects those risks are shifting towards a better balance as labor market overheating eases and inflation rates decline. If there is a rapid adjustment in the labor market in the future, it may become a reason for interest rate cuts, which is already very clear.
According to the FOMC meeting minutes, several participants believe that supporting a 0.25% interest rate cut in July is a reasonable choice due to recent progress in inflation suppression and rising unemployment rates. Most participants believe that monetary easing at the next meeting is appropriate if future inflation data meets expectations. Compared with the modified content of the statement, it can be seen that the momentum of initiating interest rate cuts is increasing. On the other hand, many participants still support maintaining a monetary policy that suppresses the economy and points out that there are differences in their views on the degree of tightening. It emphasized that there is no pre-set financial policy path and that comprehensive judgments will still be made based on future data without confirming any progress in the particular discussion on the speed of interest rate cuts.
The July US employment statistics, consumer price index, and other data released after the FOMC meeting show a more transparent trend of slowing employment growth and inflation, making it more likely to start cutting interest rates at the next FOMC meeting. The revised annual benchmark for US employment statistics released yesterday lowered the number of non-farm sector jobs in the past year before March to a slower growth rate, which may also prompt the Federal Reserve to recognize the increased risk of employment targets and decide to cut interest rates. The focus of the discussion is expected to shift from whether the interest rate cut itself is reasonable to issues such as the magnitude of the cut and the subsequent pace. If relaxing the degree of financial tightening to stabilize the real policy interest rate becomes the main reason for interest rate cuts, then a gradual 0.25% interest rate cut will become the main scenario based on the rate of inflation slowdown.
■ If the main reason for the interest rate cut is the stability of the actual policy rate, then a gradual 0.25% interest rate cut will become the main scenario.
On the 21st, the Federal Open Market Committee (FOMC) released meeting minutes (July 30th and 31st meetings). At the FOMC meeting on July 30th and 31st, the statement's wording was revised from "maintaining high vigilance against the risk of rising prices" in June to "paying attention to the dual task of two aspects of risk." However, there have been no significant changes in policy guidelines, so this revision is not intended to predict an early interest rate cut. Instead, as Federal Reserve Chairman Powell stated at the FOMC post-meeting press conference, it reflects those risks are shifting towards a better balance as labor market overheating eases and inflation rates decline. If there is a rapid adjustment in the labor market in the future, it may become a reason for interest rate cuts, which is already very clear.
According to the FOMC meeting minutes, several participants believe that supporting a 0.25% interest rate cut in July is a reasonable choice due to recent progress in inflation suppression and rising unemployment rates. Most participants believe that monetary easing at the next meeting is appropriate if future inflation data meets expectations. Compared with the modified content of the statement, it can be seen that the momentum of initiating interest rate cuts is increasing. On the other hand, many participants still support maintaining a monetary policy that suppresses the economy and points out that there are differences in their views on the degree of tightening. It emphasized that there is no pre-set financial policy path and that comprehensive judgments will still be made based on future data without confirming any progress in the particular discussion on the speed of interest rate cuts.
The July US employment statistics, consumer price index, and other data released after the FOMC meeting show a more transparent trend of slowing employment growth and inflation, making it more likely to start cutting interest rates at the next FOMC meeting. The revised annual benchmark for US employment statistics released yesterday lowered the number of non-farm sector jobs in the past year before March to a slower growth rate, which may also prompt the Federal Reserve to recognize the increased risk of employment targets and decide to cut interest rates. The focus of the discussion is expected to shift from whether the interest rate cut itself is reasonable to issues such as the magnitude of the cut and the subsequent pace. If relaxing the degree of financial tightening to stabilize the real policy interest rate becomes the main reason for interest rate cuts, then a gradual 0.25% interest rate cut will become the main scenario based on the rate of inflation slowdown.