Fed rate cut divergence exposed! The world is closely watching September, is your wallet ready?

On July 10 at 12:00 AM Beijing time, the Fed released the minutes of the Federal Open Market Committee (FOMC) interest rate meeting held on June 17-18.
The minutes show that the Federal Reserve officials present have differing opinions on the future direction of monetary policy. Although most officials believe that "this year is suitable for interest rate cuts," the debate over the timing and magnitude is particularly intense.
Why does every move of the Fed attract such great attention? What is the logic behind the interest rate cut? Why is it said that the result of this rate cut will impact everyone's wallet?
Today, let's unravel the layers together and help you understand the underlying logic and potential impact of this policy shift.
Why is the world closely watching the Fed's interest rate cuts?
The Fed's monetary policy is not only the "steering wheel" of the US economy but also the "main valve" of global liquidity. Its influence is reflected in three levels:
1. The "barometer" of the capital market: The Fed's interest rate cuts often mean lower market funding costs, making it easier for businesses to finance, and risk assets such as the stock market and bond market may enter an upward cycle.
For example, after the 2008 financial crisis, the Fed continuously lowered interest rates and launched quantitative easing, directly driving the U.S. stock market into a ten-year bull market.
2. The "trigger" of exchange rate fluctuations: Interest rate cuts may lead to a depreciation of the dollar, resulting in an appreciation of emerging market currencies, which in turn affects the profits of multinational companies and the global trade landscape.
After the Fed cut interest rates in 2020, currencies such as the renminbi and euro strengthened for a time, attracting a large inflow of international capital into the Asian market.
3. Economic expectations as a "barometer": The Fed's decisions reflect its judgment on the economic outlook for the United States and even the global economy. If interest rate cuts materialize, it may indicate a slowdown in the U.S. economic growth, and other economies around the world may also be forced to adjust their policies in response.
Why is the Fed considering cutting interest rates? Economic weakness or political pressure?
On the surface, the Fed's interest rate cut appears to be a response to the economic slowdown, but the deeper reasons are far more complex.
1. Divergence in economic data: Despite the low unemployment rate in the United States, signs of weak manufacturing and weakened consumer momentum have raised concerns.
Goldman Sachs pointed out that the U.S. labor market "seems healthy, but finding a job is becoming more difficult," and seasonal factors and changes in immigration policy may further suppress job growth.
2. The "Expectations Game" of Inflation: Fed Chair Powell has repeatedly emphasized that "a decline in inflation is a prerequisite for interest rate cuts," but the minutes from the June meeting show that officials expect inflation to rebound to 3% in the coming months.
This contradictory attitude reflects the dilemma of the policy - on one hand, it wants to avoid runaway inflation, and on the other hand, it fears a hard landing for the economy.
3. The Underlying Political Pressure: The Trump administration has recently been exerting frequent pressure on the Fed, calling on Wednesday for the Fed to cut the federal benchmark interest rate by at least 3 percentage points to help reduce the cost of servicing national debt.
However, in the face of pressure, Fed Chairman Powell has repeatedly stated on various occasions that he will not yield to political pressure when formulating monetary policy.
He insists that, in the context of a strong economy and uncertain inflation, the Fed is in a favorable position to remain patient before obtaining more information.
What chain reactions will occur after the interest rate cut is implemented?
Citigroup believes that although last week's strong employment data in M country blocked the possibility of a rate cut in July, the consensus among Fed officials on cooling inflation is driving the process of starting rate cuts in September.
If the Fed really starts to cut interest rates in September, global markets may show the following trends:
1. Stock Market: Short-term frenzy and long-term concerns coexist. Goldman Sachs predicts that interest rate cuts will drive the S&P 500 index up by over 10% in the next 12 months, with tech stocks and consumer sectors likely to be the biggest winners. However, caution is needed regarding the risk of "all good news priced in."
Deutsche Bank pointed out that if the rate cut is not as expected or economic data worsens, the market may fluctuate in the opposite direction.
2. US Dollar: Under depreciation pressure, the "seesaw effect" may cause the US Dollar Index to fall below the 100 mark, while currencies such as the Renminbi and Yen may strengthen temporarily, benefiting export-oriented economies like China.
Emerging market assets (such as gold and Hong Kong stocks) will attract more capital inflows, but countries with high debt may face exchange rate shocks.
3. Enterprises: Financing loosening and cost pressures coexist. The cost of issuing corporate bonds in the U.S. has decreased, and technology giants are expected to increase share buybacks. However, export enterprises may suffer profit losses due to the depreciation of the dollar.
The Fed's interest rate decisions have never been a simple "economic issue," but rather a complex game of economics, politics, and international relations.
For us, rather than speculating on the policy path, it is better to focus on two major anchors: the true direction of inflation data and the coordinated actions of global central banks. #美联储降息#