Market conditions are unpredictable; what is the progress of the Federal Reserve's interest rate cuts?

Tomorrow, Powell will be giving a speech again, so let's discuss the process of The Federal Reserve (FED) lowering interest rates briefly before he comes out.

We know that there will definitely be no interest rate cuts in May, this is the consensus. The question is whether there will be a cut in June, so everyone is waiting to hear Powell's tone tomorrow, whether it leans hawkish or dovish.

First, the conclusion: I personally believe that The Federal Reserve (FED) will not cut interest rates in June, and the earliest it should happen is in July.

Let's break it down into several points.

The first point is the uncertainty of the White House policies.

The function of the Federal Reserve (FED) is to provide a deterministic monetary policy, while the uncertainty brought by the king conflicts with the function of the Federal Reserve (FED).

And if you want Powell to take the blame for the king who understands, that is impossible; he definitely will not pay for the mistakes of the executive branch. Powell has also made it clear that he will not pay for the policies of the White House. Therefore, I believe Powell will not be in a hurry to cut interest rates, especially when the policy outlook is unclear.

Powell has to wait; he has to wait to see the actual implementation of the 90-day pause on tariffs, he has to wait to see the negotiations between China and the United States, and he has to wait to see the real impact of tariffs on prices.

The second point is the most fundamental one, which is still the issue of inflation.

Essentially, Powell is worried that the Federal Reserve will repeat the mistakes of the 1970s. Especially because during the pandemic, his famous remark that "inflation is transitory" severely misjudged the trend of prices, leading to his current fears of making the same mistakes again.

Inflation is currently around 2.4%, which is considered a success from bringing it down from around 7%. However, after this decrease, he is now very afraid of inflation turning back, because if it does, it won't be something that can be resolved in half a year or a year.

Hastily lowering interest rates could not only cause inflation to return but also lead the market to place all the blame on The Federal Reserve (FED). The massive subsidies issued by the Treasury at that time are actually the root cause of inflation, yet the market directs its criticism towards the Federal Reserve.

So Powell intends to say that we endure the economic pain for half a year, and then we shouldn't let inflation come back. Then later he can completely ease the monetary policy, as there are many tools in the toolbox for easing. However, if the inflation spiral continues, it could be another two or three years, and we don't know how long it will be a torment.

The third point is Powell's selfishness.

Powell can serve for a maximum of 26 years now, and generally, there are hardly any substantial actions in the last six months of a typical term. So his current goal is to proceed steadily and conservatively until the end of the year, ensuring that there are no major issues with employment and inflation, and to maintain his reputation as the Chairman of The Federal Reserve (FED).

Powell will not engage in any risky maneuvers; he absolutely will not do anything that jeopardizes his reputation at the last moment. I have been observing Powell for several years, and essentially, he is someone who plays extremely by the book.

The showdown between Powell and the Don has ended, and the Don can be said to have suffered a complete defeat, openly surrendering and telling the media: there is no intention to dismiss the Chairman of The Federal Reserve (FED). So Powell is now in an invincible state; as long as he does not want to do something, no one can pressure him, especially since the members of the main reserve are all aligned with him on the interest rate issue.

Therefore, there is no reason to believe that the Federal Reserve (FED) will cut interest rates in June.

From a timing perspective, the end of July is a more suitable point to start cutting interest rates during the FOMC meeting, as the next meeting is in September. If rates are cut in September, it will be two months later, and the timing will seem a bit slow.

Therefore, a rate cut at the end of July may be the most comprehensive and routine choice based on a comprehensive assessment. If the rate is cut in July, it essentially gives Powell nearly three months to observe the implementation of tariff policies and the impact of inflation.

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