There are still two critical interest rate decision meetings by the Federal Reserve for the remainder of this year, scheduled for November 7 and December 18. Although the market generally expects a 98% likelihood of a 25 basis point rate cut in November and a 78% chance of another cut in December, major Wall Street executives are skeptical. At the "Future Investment Initiative" economic forum held in Saudi Arabia last week, several CEOs from Goldman Sachs, Morgan Stanley, Standard Chartered Bank, and State Street Bank unanimously stated that they do not believe the Federal Reserve will implement two rate cuts this year.
These executives pointed out that the current inflation pressure in the U.S. economy remains high, driven by factors such as the labor market, wage growth, and policy expenditures. Particularly in the policy stances of the two presidential candidates, parts involving public spending, manufacturing outsourcing, and tariffs might further elevate inflation, posing obstacles to any easing policy by the Federal Reserve. A Wall Street executive noted the notable stickiness of current inflation, with U.S. employment and wage data indicating that inflation is unlikely to quickly drop to the Federal Reserve's 2% target. They believe that at most, there might be only one rate cut this year to maintain flexibility in combating inflation.
Additionally, some executives stated that the shift in the global economic environment signals that the era of zero interest rates and loose monetary policy has ended, and interest rates will be higher in the future. The complexity of geopolitical issues and challenges within the economic sphere will also become important considerations in the Federal Reserve's decision-making, with interest rate policies possibly becoming more robust to counter future risks.
In summary, most Wall Street executives do not anticipate rapid rate cuts twice in the short term by the Federal Reserve, which could provide some support for the U.S. dollar index, limiting its downside. The future movement of the dollar will also be influenced by other factors, especially the upcoming U.S. elections, whose policy uncertainties could further affect dollar volatility. Investors need to pay attention to policy changes and economic data in the coming weeks to evaluate the Federal Reserve's actual decision-making path.
