Has the 50 basis point rate cut been too aggressive? This week, the Federal Reserve's decision faces a "data test"

Last week, the Federal Reserve announced a 50 basis point rate cut. Is such a significant rate cut too aggressive? A series of economic data to be released this week will capture clues to future economic trends.

On Thursday, the final annualized quarterly real GDP for the second quarter and the core PCE price index for the second quarter in the United States will be released. The former will be an important reference for measuring the performance of the U.S. economy, while the latter is the Fed's preferred inflation indicator.

In addition, at least eight Fed officials, including Powell, Fed Vice Chairman Michael Barr, and New York Fed President John Williams, plan to give speeches on Thursday. These speeches may capture key information on future Fed rate cuts.

What is the next step for the Federal Reserve? The market closely watches the release of key data

Although the decision to cut rates by 50 basis points boosted the stock market, especially with the S&P 500 and Dow Jones Industrial Average both recording gains last week, the market's optimism did not last long. Investor concerns about economic growth are gradually emerging.

Despite easing price pressures, Powell's remarks last week remained cautious, stating that "the battle against inflation is not yet won."

Is the U.S. economy still strong? Investors will focus on the upcoming GDP and PCE economic data.

Meanwhile, several Fed officials are expected to give speeches this week. The market anticipates two more rate cuts this year, each by 25 basis points, with the possibility of further cuts in 2025 also under discussion.

It is worth noting that despite the reduced inflation risks, Powell warned that a slowdown in the labor market could pose a new challenge. Analysts expect the PCE data to grow by 2.3% year-on-year, lower than the 2.5% increase last month. If this data further declines, it will support the Fed's rate cut decision.

Furthermore, with increased economic uncertainty, especially the potential impact of the U.S. presidential election, the market is concerned that premature easing policies may weaken the Fed's ability to achieve its 2% inflation target.

In the tech sector, apart from NVIDIA, Mag7 all recorded gains last week. Due to interest rate sensitivity, investors closely monitor the Fed's policy changes to assess their impact on future growth.

This week, the Fed will continue to face a dual test from economic data and the market. Whether the rate cut pace is appropriate remains to be seen