The divergence over the Fed's rate cut has intensified! One side advocates for a 50 basis point cut, while the other side has seven opposing votes, leaving the market in a dilemma.

The phrase "Interest rate cuts are a done deal" has raised doubts in the trading room. CME shows a 94% probability of a rate cut in October, but the Fed is facing a data vacuum and internal opposition. The dovish newcomer is loudly calling for a "50 basis point cut in September," with nine supporting votes in the dot plot, while the hawkish seven are firmly opposed, concerned about inflation and asset bubbles.

The two sides are only two votes apart, and Powell is under immense pressure to make a decision. Data is completely absent due to the government shutdown, yet the market continues to rise, with the 10-year Treasury yield dropping to 4.1%, and the Nasdaq repeatedly hitting new highs—it's as if the market is driven by faith.

Once the data restarts and surprises to the downside, the market may directly bet on an "emergency rate cut," leaving Powell with no way out. Political pressure is also mounting, with Trump urging for a rate cut and the Treasury Secretary questioning the balance sheet reduction plan. Powell repeatedly emphasizes independence, but in reality, he is calling for: don’t force the Fed to choose between unemployment and inflation.

The probability of a 25 basis point cut in October remains high, but the wording of the statement will become the focus. If the tone is dovish, the market will celebrate; if it is hawkish, US stocks may repeat the dramatic drop of 2018. Powell needs to maintain a "data-dependent" stance while cutting rates—despite the data still being locked away in the drawer.

This rate cut is like giving an ice pack to someone with a high fever; the effect is uncertain. Investors should not bet everything on the rate cut, but rather keep cash on hand and wait for data to stabilize before making further moves.