Wall Street firmly believes that the Federal Reserve will ignore Trump's warning!

In an interview with Bloomberg last week, the Republican presidential nominee tried to dispel any plans to cut interest rates before the November election.

Trump, when talking about the Federal Reserve, a politically independent and non-partisan institution, said, "This is something they know they shouldn't do."

Trump had previously claimed he would oust Fed Chairman Powell, but he changed his stance in this interview, saying he would let Powell complete his remaining term, "especially if I think he's doing the right thing."

However, at least Wall Street seems convinced that Powell and his six colleagues on the board will oppose Trump. Their confidence comes from both slowing economic data and recent public speeches by board members in the past few weeks.

Last week, Fed board member Bullard said that the timing of a rate cut is "getting closer," but it has not reached the "final destination" yet.

Similarly, New York Fed President Williams also told the Wall Street Journal that there are "positive signs" indicating that inflation is moving in the right direction, but he wants to see some further data before making any rate cut decisions.

As a result, many analysts read between the lines and concluded that a rate cut will not come immediately, but it is imminent.

On Tuesday, Reuters released a survey of 100 economists. All economists believe that the Fed will keep rates unchanged at the end of July's next meeting, but 82% of respondents predict the first rate cut of 25 basis points will come in September.

A Reuters poll last month showed that about 60% of economists are confident in a rate cut in September, a consensus that is clearly growing.

This view is also supported by Wharton School professor Jeremy Siegel and others. In his weekly commentary for Wisdom Tree this week, he wrote, "The market expects the Fed to signal a rate cut in September, provided that the economic trends continue as expected. I agree with this view."

Siegel pointed out that the number of people applying for unemployment benefits has been rising since the July 4th holiday, with the latest data from the U.S. Department of Labor showing an increase of 20,000 in initial jobless claims from the previous week.

Siegel emphasized that some economists believe that as the aftermath of Hurricane Barry in Texas gradually subsides, the number of unemployed people will fluctuate. He added, "These mixed signals make predictions complicated, but overall, consumer spending is slowing down."

Wall Street's Thoughts

Just as warned by Brian Moynihan, CEO of Bank of America, Powell hopes not to squeeze consumers too tightly, but also to continue pushing the Fed to achieve its 2% inflation target.

This may be why Bank of America, while acknowledging that a rate cut in September is an option, is also taking hedging measures.

Economists Tatonga Rusike and Mikhail Liluashvili wrote in a report published in Fortune last Sunday, "Our U.S. economists still believe that the Fed will make its first rate cut in early December They are concerned that the extent of economic cooling may not be sufficient to support an early rate cut. The signal for a rate cut in September exists, but it is not enough to indicate that the actual situation will be like this."

Regarding Powell's comments, Lusick and Lilu Ashwili added, "In our view, the committee is clearly closer to believing that a rate cut may occur for the first time in September. However, we do not believe that most members will actually support it by then."

Other institutions are more optimistic.

Goldman Sachs reiterated its view that the Fed will cut rates in September in a note released last week, especially considering Powell and Williams' comments.

Meanwhile, senior U.S. economist Brian Rose from UBS wrote on Monday that the likelihood of a rate cut by the Fed in September is "close to 100%."

Rose said, "Currently, the market expects a rate cut of 25 basis points or more twice before the end of the year, with the likelihood of a rate cut in September close to 100%. Our view remains that the Fed will cut rates once every quarter in the coming quarters. However, if the economic situation deteriorates, the Fed may cut rates more aggressively. On the fiscal side, we do not expect any major policy changes before the election."