The divergence over the slashing of interest rates by the Federal Reserve (FED) has been revealed! The world is watching in September, are you prepared for your wallet?

At 3 a.m. on July 10, Beijing time, the Federal Reserve (FED) released the minutes of the Federal Open Market Committee meeting (FOMC) held from June 17 to 18.
The minutes show that officials from the Federal Reserve (FED) present at the meeting have disagreements about the future direction of monetary policy. Although most officials believe that "this year is appropriate for slashing interest rates," the debate over the timing and magnitude is particularly heated.
Why does every move by the Federal Reserve (FED) attract so much attention? What is the logic behind the reduction of interest rates? Why is it said that the result of this reduction in interest rates will impact everyone's wallet?
Today, we will uncover together, bringing you to understand the underlying logic and the potential impacts of this policy change.
Why is the world so focused on the Federal Reserve's interest rate cuts (FED)?
The Federal Reserve (FED) of monetary policy is not only the "throttle" of the American economy but also the "master valve" of global liquidity. Its influence manifests at three levels:
1. The "barometer" of the capital market: the reduction of interest rates by the Federal Reserve (FED) generally means that the cost of capital in the market decreases, facilitating corporate financing, and risk assets such as the stock market and the debt market may enter a bull cycle.
For example, after the financial crisis of 2008, the Federal Reserve (FED) continuously lowered interest rates and initiated quantitative easing, directly boosting the US stock market to start a ten-year bull market.
2. The "tipping point" of exchange rate volatility: a reduction in interest rates can lead to the depreciation of the dollar, while currencies of emerging markets appreciate relatively, thus affecting the profits of multinational companies and the pattern of global trade.
After the interest rate cut by the Federal Reserve (FED) in 2020, the yuan, euro, and other currencies temporarily strengthened, attracting a large flow of international capital into the Asian market.
3. The "thermometer" of economic expectations: the decisions of the Federal Reserve (FED) reflect its judgment on the economic outlook of the United States and the world. If the reduction in interest rates materializes, it could mean a slowdown in U.S. economic growth, and other countries around the world may also be forced to adjust their policies in response.
Why is the Federal Reserve (FED) considering lowering interest rates? Economic weakness or political pressure?
At first glance, the Federal Reserve's interest rate cuts (FED) aim to tackle the economic slowdown, but the underlying reasons are much more complex than they appear:
1. Divergence in economic data: although the unemployment rate in the United States remains low, signs of weakness in manufacturing and a decrease in consumption dynamism have already raised concerns.
Goldman Sachs pointed out that the labor market in the United States "seems healthy, but the difficulty in finding a job is increasing," and seasonal factors and changes in immigration policy may further pressure job growth.
2. The "game of expectations" of inflation: The chairman of the Federal Reserve (FED), Jerome Powell, has emphasized several times that "the decline in inflation is a prerequisite for the reduction of interest rates," but the minutes from the June meeting show that officials expect inflation to rise back to 3% in the coming months.
This contradictory attitude reflects the dilemma of politics - to avoid uncontrollable inflation and fear a hard landing of the economy.
3. The underlying political pressures: The Trump administration has frequently pressured the Federal Reserve (FED) recently, calling on Wednesday for the Federal Reserve (FED) to reduce the federal benchmark interest rate by at least 3 percentage points in order to help lower the cost of repaying the national debt.
However, under pressure, the president of the Federal Reserve (FED), Jerome Powell, has reiterated on several occasions that he will not yield to political pressure in formulating monetary policy.
He insists that, in a situation of strong economy and uncertainty about inflation, the Federal Reserve (FED) is in a favorable position to maintain patience before obtaining more information.
What will be the chain reactions caused by the reduction of interest rates?
Citigroup believes that, despite the relatively strong employment data from country M last week blocking the possibility of a rate cut in July, the consensus among Federal Reserve officials regarding the slowdown in inflation is driving the beginning of the rate reduction process in September.
If the Federal Reserve (FED) really starts to cut interest rates in September, global markets may exhibit the following trends:
1. Stock market: Short-term festivities and long-term concerns coexist. Goldman Sachs predicts that the reduction in interest rates will drive the S&P 500 index to rise over 10% in the next 12 months, with technology and consumer sector stocks potentially being the biggest winners. But one must be cautious of the risk of "good news already priced in."
Deutsche Bank pointed out that if the reduction in interest rates is not as significant as expected or if economic data worsens, the market may experience inverse volatility.
2. Dollar: the "balance effect" under devaluation pressure can cause the dollar index to fall below the 100 mark, while the renminbi, yen, and other currencies may strengthen at times, benefiting export-oriented economies like China's.
Emerging market assets ( such as gold and Hong Kong stocks ) will attract more capital flows, but countries with high debt may face currency shocks.
3. Companies: coexistence of easing resource mobilization and cost pressure. The cost of debt issuance for American companies is decreasing, technology giants may increase their buyback power, but exporting companies may suffer profit losses due to the depreciation of the dollar.
The Federal Reserve's interest rate decision (FED) is never a simple "economic issue," but rather a complex game of economics, politics, and international relations.
For us, instead of speculating on the path of policies, it is better to focus on two anchor points: the true direction of inflation data and the coordinated actions of global central banks.