Fed rate cut in September? Analyst: Economy healthy, no need for "prescription"!

The market is now firmly expecting the US to cut interest rates in September, but Carl Weinberg, chief economist at High Frequency Economics, believes that the Federal Reserve may have sufficient reasons not to cut rates at that time.

According to data from the London Stock Exchange Group (LSEG), after a report showing consumer price index lower than expected, the market pricing for a rate cut at the Fed's autumn meeting has risen from around 70% to over 90%. Earlier, Fed Chairman Powell stated earlier this week that there are risks in maintaining high rates for a long time, which analysts interpreted as a "moderately dovish" comment, further enhancing expectations of a rate cut.

However, Weinberg pointed out in an interview with the "European Financial Forum" on Friday that there are also risks in easing monetary policy, casting a shadow over the prospect of a rate cut.

Weinberg said, "Powell was very clear in his testimony this week that inflation indicators and the overall economy are moving in the direction we hope for. He said this includes unemployment around 4%, inflation moving towards 2%, and economic growth 'roughly' at potential levels."

Weinberg continued, "But he also hinted, if the economy is at full employment, inflation is where we want it, and the economy is growing well, why would we want to change anything? Why would we want to intervene in the conditions we currently have? In that case, why would you want to cut rates? There is noise, rumors, and data supporting a rate cut at the September meeting. However, there is also a dark cloud hanging over that decision."

Weinberg added that while a rate cut in September seems possible now, many things could change between now and the Fed meeting on September 19.

There are two more CPI reports to be released before then. The next Fed meeting is at the end of July, with the market estimating only a 5% chance of a rate cut at that time.

US inflation is declining but still higher than the UK and the Eurozone

Although the US inflation peak has been lower than many other major economies in the past three years, its decline has been slower, putting the Federal Reserve behind in the path of monetary policy easing.

Central banks in the Eurozone, Switzerland, Sweden, and Canada have already cut rates this year, while the Bank of England's decision in August remains delicately balanced