🔥 Thoroughly Explained! The Top Ten Hard-Core Truths About the Federal Reserve's Reluctance to Raise Interest Rates

The long-anticipated expectation of Fed rate hikes is finally cooling down!

Kevin Wash will attend his first policy meeting since taking office. Previously, the market was full of hawkish voices: better-than-expected non-farm payroll data, high PCE inflation, booming AI markets, and soaring international oil prices—all signals seemingly pushing the Fed to hike rates.

But beneath the surface of the lively scene lies the core truth: the Fed simply dares not raise rates, and definitely cannot move rates up!

Today, using ten of the most hardcore and down-to-earth core logics, I will reveal the underlying truths behind the scenes and help you understand the current economic dilemma in the United States!

1. Inflation is artificially high! Core inflation has already been weakening

In May, the US overall CPI increased by 4.2% year-over-year, seeming like inflation is still running hot, but in reality, there’s a lot of falsehood.

Breaking down the data, over 60% of the inflation increase is entirely supported by oil prices, a typical external disturbance inflation. The core CPI, which the Fed truly focuses on and is most indicative, only rose by 0.2% month-over-month, well below market expectations.

The remaining inflation pressure is entirely due to supply-side issues caused by Middle Eastern geopolitical conflicts. This structural inflation cannot be effectively addressed by rate hikes and tightening monetary policy; it will only harm the real economy.

2. Booming non-farm payrolls are short-term pulses, not signs of overheating

In May, non-farm employment increased by 172k, a seemingly explosive number that deceived most investors.

Dissecting the employment structure reveals the truth: 73% of the new jobs come from hotel services and temporary local government hires, all short-term positions created to accommodate various holidays and World Cup events.

Meanwhile, core industries representing the economy’s fundamentals—finance, retail, manufacturing—are still experiencing layoffs and downsizing. The employment boom is just a short-term illusion, not a sign of a fully overheated economy.

3. The surge in oil prices is due to geopolitical games; rate hikes will only make it worse

Currently, Brent crude oil remains volatile at high levels of $95–$110. The core reason for the soaring oil prices is the disruption of shipping through the Strait of Hormuz and turmoil in the Middle East.

This is a supply crisis caused purely by geopolitical conflicts, unrelated to market liquidity.

Looking back at the stagflation of the 1970s in the US: for energy inflation driven by supply-side shocks, blindly raising interest rates not only fails to curb prices but can directly choke the economy, triggering stagflation—a costly mistake.

4. The economy appears prosperous, but internally weak and seriously inflated

The AI market craze sweeping the internet is just a localized hotspot in a single sector, unable to sustain the overall US economy.

Currently, manufacturing PMI remains low, GDP growth has been below potential for a long time, and the real estate market continues to be sluggish—all three core economic indicators are weakening.

Localized hotspots cannot support the entire economy, and it’s nowhere near the point where a heavy tool like rate hikes is needed to tighten liquidity.

5. Household debt is exploding, and people’s lives are already overwhelmed

On one side, soaring oil prices continue to raise living costs; on the other, prolonged high interest rates squeeze household incomes.

Under this double pressure, US credit card delinquency rates keep rising, and consumers are cutting back on non-essential spending and downgrading their lifestyles.

More critically, US workers’ hourly wages have only increased by 3.4%, far behind the rise in costs. Ordinary people can no longer bear the current economic pressure. Raising rates now will only break the bottom line of consumer spending.

6. The risk of a commercial real estate crash is high, and banking crises remain hidden

Commercial real estate is currently the biggest hidden minefield in the US!

The vacancy rate of office buildings nationwide remains high, asset valuations continue to plummet, and many small and medium regional banks hold huge amounts of bad commercial real estate loans, with risks piling up.

If the Fed raises rates again, refinancing costs will soar, causing many real estate companies and commercial entities to default, and regional bank crises in 2024 could repeat, triggering systemic financial risks.

7. US debt is out of control; high interest rates will crush the fiscal system

The US federal debt has surpassed $39 trillion, and annual interest payments have officially exceeded $1 trillion, pushing fiscal pressure to the brink.

Continuous rate hikes will only further increase debt financing costs, creating a deadly cycle: higher rates → larger interest payments → bigger fiscal deficits → passive rise in market interest rates, completely exhausting US fiscal credibility.

8. Global markets are extremely fragile and cannot withstand rate hike shocks

Today’s financial markets are as fragile as thin glass, with no risk resistance.

Previously, just market speculation about “rate hike expectations” triggered sharp declines in US stocks, soaring US bond yields, and global risk assets collapsing.

Once the Fed implements actual rate hikes, combined with market sentiment and capital outflows, the global capital markets are likely to face a deep crash.

9. Rate hikes harm others and hurt oneself, undermining the US’s global economic position

The Fed’s rate hikes have always been a “harvesting sickle” for global capital, but now it’s become a double-edged sword.

Raising interest rates on the dollar will directly cause significant depreciation of emerging market currencies, massive capital outflows, and soaring external debt default risks, leading to global economic turmoil.

Global economic slowdown and collapsing demand in emerging markets will eventually backfire on US exports and foreign trade, a classic case of harming others and oneself, ultimately biting back.

10. Monetary policy has a lag effect; the benefits of previous rate cuts are still being realized

Monetary policy is never instant; it has a transmission lag of 3–12 months.

The easing effects of multiple Fed rate cuts in 2024–2025 are only now gradually materializing, as reflected in weakening core PCE and cooling CPI month-over-month.

The current easing benefits are just beginning to show; raising rates now will directly interrupt the downward trend of inflation and disrupt the economic recovery rhythm.

Final summary in one sentence:

Inflation is driven by geopolitical supply shocks, employment is artificially assembled with temporary jobs, the economy is supported by localized hotspots, and the capital markets are extremely fragile!

In conclusion, the best option for Wash’s first policy meeting is only two words: Wait and see! Most likely, they will #TradFiCFD黄金大师赛 keep interest rates unchanged and stand pat! @Gate