Disagreements over the Fed's interest rate cuts have surfaced! The world is closely watching September; is your wallet ready?

At 2 a.m. Beijing time on July 10, the Fed released the minutes of the Federal Open Market Committee (FOMC) meeting held on June 17-18 regarding interest rate decisions.
The minutes show that the participating Fed officials have differing views 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 extent has been particularly intense.
Why do the actions 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 interest rate cut will impact everyone's wallet?
Today, let's peel back the layers together and help you understand the underlying logic and potential impacts 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 American economy but also the "main valve" of global liquidity. Its influence is reflected in three levels:
1. The "barometer" of the capital market: A Fed rate cut often means a decrease in market funding costs, making corporate financing easier, and risk assets such as the stock and bond markets may enter a rising cycle.
For example, after the 2008 financial crisis, the Fed continuously lowered interest rates and initiated quantitative easing, directly driving the US stock market into a ten-year bull market.
2. The "trigger" of exchange rate fluctuations: A rate cut may lead to the depreciation of the dollar, causing emerging market currencies to appreciate relatively, thereby affecting the profits of multinational companies and the global trade pattern.
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. The "Barometer" of Economic Expectations: The Fed's decisions reflect its judgment on the economic outlook for the United States and even the global economy. If interest rate cuts are implemented, it may indicate a slowdown in the growth of the U.S. economy, and other global economies 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 cuts are aimed at addressing economic slowdown, but the underlying reasons are far more complex than they appear:
1. Divergence in economic data: Although the U.S. unemployment rate remains low, signs of weakness in manufacturing and a slowdown in consumer momentum have raised concerns.
Goldman Sachs pointed out that the U.S. labor market "seems healthy, but the difficulty of finding a job is increasing," and seasonal factors and changes in immigration policy may further suppress job growth.
2. The "Expectation Game" of Inflation: Fed Chairman Powell has repeatedly emphasized that "the decline in inflation is a prerequisite for interest rate cuts," but the minutes from the June meeting indicate that officials expect inflation to potentially rebound to 3% in the coming months.
This contradictory attitude reflects the dilemma of policy - on one hand, it aims to avoid runaway inflation, while on the other hand, it fears a hard landing of the economy.
3. Underlying Political Pressure: The Trump administration has recently been pressuring the Fed frequently, calling on Wednesday for the Fed to lower the federal benchmark interest rate by at least 3 percentage points to help reduce the cost of servicing the 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 inflation uncertainty, the Fed is in a favorable position to remain patient before obtaining more information.
What chain reactions will the interest rate cut trigger?
Citigroup believes that, despite the strong employment data from country M last week blocking 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: A coexistence of short-term euphoria and long-term concerns Goldman Sachs predicts that interest rate cuts will drive the S&P 500 index up by over 10% in the next 12 months, with technology and consumer sectors likely to be the biggest winners. However, caution is needed for the risk of "good news being fully priced in."
Deutsche Bank pointed out that if the rate cut is less than expected or economic data worsens, the market may experience reverse volatility.
2. US Dollar: Under devaluation 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 easing and cost pressure coexist. The cost of issuing corporate bonds in the U.S. has decreased, and tech giants are expected to increase buybacks, but export companies 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 involving 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#