Fed Likely to Hold Rates on the 30th...
Focus on Powell's Remarks
Second Quarter GDP, Inflation, and Employment Indicators to Be Released in Succession
This week, Wall Street's attention is focused on the U.S. tariff negotiations and the Federal Open Market Committee (FOMC) regular meeting, which is the first monetary policy meeting of the second half of the year. The key issue is not the decision on the benchmark interest rate itself, but rather how dovish a message Jerome Powell, the Chair of the Federal Reserve (Fed), will deliver. Economic indicators such as growth rate, inflation, and employment, which can reveal the impact of tariff policies, will also be released in succession.
According to the Fed on the 27th (local time), the FOMC will hold its regular meeting on the 29th and 30th to decide the benchmark interest rate, which currently stands at 4.25?4.5% per annum.
Although U.S. President Donald Trump is pressuring the Fed to cut rates, the market widely expects the rate to be kept unchanged. According to CME FedWatch, the probability of a rate hold is as high as 95.9%.
The most closely watched aspect of this FOMC meeting is Chair Powell's remarks. Before the expiration of the U.S. reciprocal tariff suspension measure on August 1, ongoing negotiations between the U.S. and major countries are increasing external uncertainties that could affect future monetary policy. As a result, it is becoming more difficult to predict inflation and employment trends, making the Fed even more cautious in setting its policy direction. In this context, if Chair Powell hints at the possibility of a rate cut in September, the market is likely to react immediately.
Major U.S. economic indicators to be released around the FOMC meeting are also drawing market attention. On the 30th, the U.S. Department of Commerce will announce the preliminary estimate of second-quarter Gross Domestic Product (GDP). The market expects the U.S. economy to have rebounded from a -0.5% contraction in the first quarter to grow at an annualized rate of 2.4% quarter-on-quarter.
On the 31st, the Fed's most closely watched inflation indicator, the June Personal Consumption Expenditures (PCE) price index, will be released. The core PCE price index is expected to have risen by 0.3% from the previous month, up from 0.2% in May. On the 1st of next month, the U.S. Department of Labor will release the July employment report. Nonfarm payrolls are expected to increase by 108,000, a slowdown from 147,000 in June, and the unemployment rate is projected to rise slightly from 4.1% to 4.2%. While rising prices are a factor that could delay a rate cut, a slowdown in the labor market could increase pressure for a cut.
Big tech companies will also be announcing their earnings in succession. Following Alphabet, Google's parent company, and Tesla last week, Microsoft (MS) and Meta, Facebook's parent company, will report on the 30th, and Apple and Amazon are scheduled to announce their results on the 31st. In particular, whether the recent surge in artificial intelligence (AI) investments is translating into actual profits will be a key point to watch.
Additionally, ongoing trade negotiations between the U.S. and various countries, ahead of the scheduled expiration of the reciprocal tariff suspension measure on the 1st of next month, are also considered a major factor that could influence stock market trends.
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