CMB Macro: The Federal Reserve's forward-looking assessment of stagflation risks is the reason why it is hesitant to reduce interest rates.

CMB Macro Research report stated that overall, there was little incremental information at this meeting, with most of the meeting statement and speeches continuing the content from May. Powell hinted multiple times during the Q&A that the Fed will make decisions after inflation fully reflects tariffs. Combined with the downward revision of growth expectations and the upward revision of inflation and unemployment rate expectations in the Summary of Economic Projections (SEP), the Fed's forward-looking judgment on stagflation risk is the reason for their reluctance to cut rates. Although the dot plot still indicates two rate cuts within the year, there is significant internal dissent within the Fed. Looking ahead, the probability of both the Middle East situation and tariffs escalating at the same time is low. If the Middle East situation continues to escalate, pushing up oil prices and non-core inflation, then the tariff policy will further ease and alleviate core inflation pressure, making a rate cut within the year highly likely. The variable lies in whether the number of rate cuts aligns with the expectation of two cuts.