This week, the Federal Reserve released the clearest "interest rate cut signal" to date

The Federal Reserve has issued its strongest "rate cut" signal to date, is the September rate cut a done deal?

In public appearances this week, including two hearings by Powell in Congress, Fed officials spoke with unprecedented confidence about their control over inflation and their determination to shift monetary policy.

Supporting their confidence is better-than-expected economic data, with this week's data showing continued downward pressure on inflation, with core CPI growth hitting a three-year low, while the labor market also showed signs of weakness. In addition, U.S. banks warned that after long periods of high prices, low-income customers are showing signs of financial pressure.

Although the Fed did not specify when or by how much they would lower borrowing costs, their comments clearly indicate that a rate cut is imminent. Traders and economists widely expect the first rate cut to come in September.

Fed Officials Successively "Dovish"

Chicago Federal Reserve Bank President Guersby said on Friday that it was a "good week" for a central bank that has been trying to lower inflation without causing a recession. Guersby added:

The decline in inflation means that real interest rates are now more restrictive, and we only want to maintain this restrictiveness when necessary. If it is not needed, it is appropriate to return to a more normal state.

Since July last year, the Fed has kept its benchmark policy rate at a 23-year high of 5.25%-5.5%.

Earlier this week, Powell testified in Congress that there had been "considerable progress" in curbing price pressures, and the labor market showed clear signs of cooling, so the Fed no longer needs to focus on inflation as a top priority. Instead, the Fed faces "two-way risks" and must be more vigilant about high interest rates to avoid excessive deterioration in the job market.

Fed Governor Lisa Cook also emphasized this in her speech this week:

She said the Fed is "very concerned" about changes in the unemployment rate and will "respond accordingly."

San Francisco Federal Reserve Bank President Mary Daly said in a later interview this week:

A rate cut would be reasonable. You hear a lot of us, especially Chairman Powell, talking about how important the labor market is, which is a pretty big communication signal.

The Fed is trying to achieve a "soft landing," avoiding a sharp rise in the unemployment rate while inflation falls to target levels. Morgan Stanley asset management analyst Priya Misra said the outcome depends on whether the Fed starts easing policy soon and gradually lowers policy rates to near 3% over time.

Jonathan Pingle, former Fed employee and current Chief Economist at UBS, added that the economy is indeed slowing down, and the labor market seems to be slowing down as well. At some point, they will hope that the economic slowdown stops and stabilizes, but the risk is that the economy will continue to slow down