According to CME's "Fed Watch", as of September 13, 2024, the probability of the Fed cutting interest rates by 25 basis points in September is 72%, and the probability of cutting interest rates by 50 basis points is 28%. Some other analyses and opinions also support the possibility of the Fed cutting interest rates in September. The main basis is as follows:
1. Downward inflation: US inflation remained mild in the second quarter and has a trend of continued decline. For example, the August CPI data released by the US Bureau of Labor Statistics showed that the CPI was 2.5% year-on-year (previous value 2.9%), and the core CPI was 3.2% year-on-year (previous value 3.2%). The downward trend of inflation provides room for the Fed to cut interest rates.
2. Cooling of the job market: US job growth has slowed down and the unemployment rate has risen. Recent employment data suggests a softening trend in the job market, which is also a factor for the Fed to consider cutting interest rates.
3. Slowing economic growth: Although the US economy still has some resilience, growth has slowed. A number of economic indicators reflect that the momentum of economic growth is weakening, which requires the Fed to stimulate the economy by cutting interest rates.
4. Statements by Fed officials: Fed officials have mentioned the possibility of rate cuts in their speeches many times, and emphasized concerns about economic growth and inflation. The relevant statements have strengthened the market's expectations for the Fed to cut interest rates.
However, there is still uncertainty as to whether the Fed will cut interest rates in September. We need to pay attention to subsequent economic data and the Fed's decisions.
