The US Treasury Secretary called for a 50 basis points rate cut in September, but the probability in the futures market is only 0.1%.

After no significant rebound in inflation in July, US Treasury Secretary Bezent said in an interview with foreign media on Wednesday that the Federal Reserve should cut interest rates by 50 basis points at the upcoming September monetary policy meeting and start a series of rate cuts. He said, "If we look at any model, it shows that rates should be 150 to 175 basis points lower than the current level." Bezent's comments have raised market expectations slightly for a 50 basis point rate cut in September, but they are still very low. According to the CME FedWatch tool, the market currently only assigns a 0.1% probability to this scenario, while foreign media estimates slightly higher at 1.4%. In contrast, a 25 basis point rate cut in September has already been fully priced in by the market. Louis Navellier, the founder of Navellier & Associates, also supports Bezent's view, but warns that the Fed may be concerned that a large rate cut could be seen as a "panic signal" by the public. Several economists have pointed out that the August non-farm payrolls data to be released on September 5 will be an important factor in the Fed's decision-making process. If the data significantly worsens, particularly if there is a decrease in jobs for that month and the June or July data is revised downward to negative values, and the unemployment rate rises from 4.2% to 4.4%, this may lead to a larger rate cut. However, PNC's chief economist Gus Faucher believes that unless there is a "very bad" situation, the Fed will likely still choose to cut rates by 25 basis points. In July, the US CPI rose by 2.7% year-on-year, roughly in line with expectations, easing concerns about runaway inflation in the context of tariff increases. However, the core CPI has increased to 3.1% year-on-year, and the "super core CPI" excluding housing, energy, and food rose by 0.5% month-on-month, reaching the second-highest level in nearly 18 months. Omair Sharif, founder of Inflation Insights, pointed out that the price increases in core goods are more widespread than in June, and the transmission effects of recent tariffs have become apparent in most categories. According to the economic projections summary released by the Fed in June, core PCE inflation is expected to reach 3.1% by the end of this year. The core CPI has already reached this level, and the impact of tariffs continues to permeate. This may make officials cautious about larger rate cuts while employment slows down. In July, the US added only 73,000 non-farm jobs, and the job gains for May and June were significantly revised downward to 19,000 and 14,000, respectively, but the unemployment rate remained at 4.2%. Recent statements by Fed officials indicate that while board members Bowman and Waller lean towards a 25 basis point rate cut, most committee members still lean towards a hawkish stance in the background of inflation persisting above the 2% target for 53 consecutive months. Richmond Fed President Barkin stated this week that policy positioning will be adjusted based on further clarity in the economic situation, but did not release a clear signal of a shift to a dovish stance. Jon Hilsenrath, senior advisor at StoneX, pointed out that even though the July inflation data gives the Fed some room to cut rates, it does not mean that there will be another rate cut in October. Currently, the futures market assigns a 69% probability to another rate cut in October, but he believes this expectation is "overly optimistic" and predicts that the Fed may only cut rates twice this year, with the second cut more likely to occur in December.