Fed interest rate cut differences exposed! The world is closely watching September, is your wallet ready?

At 12:00 AM 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 attending Fed officials have differing views on the future direction of monetary policy. Although most officials believe "this year is suitable for interest rate cuts," the debate over timing and magnitude is particularly intense.
Why does every move 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 unravel 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 US economy but also the "main valve" of global liquidity. Its influence is reflected in three levels:
1. The "barometer" of the capital market: A rate cut by the Fed often means a decrease in the cost of capital for the market, making it easier for companies to finance, and risk assets such as the stock market and bond market may enter a rising cycle.
For example, after the 2008 financial crisis, the Fed continuously cut interest rates and launched quantitative easing, directly driving the US stock market into a decade-long bull market.
2. The "trigger" of exchange rate fluctuations: A rate cut may lead to a depreciation of the dollar, causing a relative appreciation of emerging market currencies, which in turn affects the profits of multinational companies and the global trade landscape.
After the Fed's interest rate cut in 2020, currencies such as the RMB and Euro strengthened for a time, attracting a large inflow of international capital into the Asian market.
3. The "weather vane" 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 rate of the U.S. economy, and other global economies may also be forced to adjust their policies in response.
Why is the Fed considering lowering interest rates? Economic weakness or political pressure?
On the surface, the Fed's interest rate cut is to respond to the economic slowdown, but the underlying reasons are far more complex than they appear:
1. Divergence in economic data: Although the unemployment rate in the United States 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 emphasized multiple times that "the decline in inflation is a prerequisite for interest rate cuts," but the minutes from the June meeting show that officials expect inflation may rebound to 3% in the coming months.
This contradictory attitude reflects the dilemma of the policy - on one hand, it aims to avoid runaway inflation, while on the other hand, it fears a hard landing of the economy.
3. The Underlying Political Pressure: The Trump administration has been frequently pressuring the Fed recently, 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 uncertainty around inflation, the Fed is in a favorable position to remain patient before gaining more information.
What chain reactions will the interest rate cut trigger?
Citi believes that although last week's strong employment data from country M has blocked the possibility of a rate cut in July, the consensus among Fed officials on cooling inflation is driving the process for a rate cut to begin in September.
If the Fed really starts cutting interest rates in September, global markets may show the following trends:
1. Stock Market: Short-term euphoria coexists with 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 potentially being the biggest winners. However, one must be cautious of the "good news fully priced in" risk.
Deutsche Bank pointed out that if the interest rate cut is less than expected or if economic data worsens, the market may experience reverse fluctuations.
2. US Dollar: The "seesaw effect" under depreciation pressure may cause the dollar index to fall below the 100 mark, while currencies such as the Renminbi and Yen may strengthen in phases, benefiting export-oriented economies like China.
Emerging market assets (such as gold and Hong Kong stocks) will attract more capital inflow, but countries with high debt may face exchange rate shocks.
3. Enterprises: Financing loosening and cost pressure coexist. The cost of issuing corporate bonds in the United States has decreased, and technology giants are expected to increase their buybacks, but export enterprises may suffer profit losses due to the depreciation of the dollar.
The Fed's interest rate decisions have never been merely an "economic issue," but rather a complex game of economics, politics, and international relations.
For us, rather than speculating on the policy path, it is better to focus on two major anchors: the real trend of inflation data and the coordinated actions of global central banks.