Trump Strongly Calls for Rate Cut, Fed Under Pressure Again
On June 11 local time, U.S. President Trump again posted on his social platform "Truth Social," calling for the Federal Reserve to lower interest rates by one percentage point. He stated that the U.S. May CPI data was "ideal," and if the Fed significantly reduces interest rates, it will notably decrease the interest expenses on maturing national debt, which he claims is "very important" for the country's finances.
In fact, as early as June 6, Trump had already stated that Federal Reserve Chairman Powell is "Mr. Too Late," directly criticizing his slow actions for causing delays in economic policy. He pointed out that Europe has already cut rates multiple times, while the Federal Reserve "hasn't moved," emphasizing that "a one percentage point cut should happen immediately."
Market Reacts Quickly, Gold Surges in Short Term
Influenced by CPI data and Trump's remarks, the market responded swiftly. U.S. CPI in May rose by 2.4% year-over-year and 0.1% month-over-month, slightly below market expectations, further reinforcing the signal that inflation is under control. Consequently, spot gold saw a short-term surge, with gains reaching $12 up to $3330.34 per ounce by 22:14 Beijing time.
Gold's reaction as a safe-haven asset indicates that there is still significant disagreement within the market regarding future policy directions and economic prospects. Traders have significantly raised their expectations for the Federal Reserve to start rate cuts in September, predicting that there may be two cuts throughout the year.
Stock Market Volatility Increases, Upside Potential Limited
Although the slowdown in inflation supports some optimistic sentiment in the market, the upward trend of U.S. stocks is facing numerous challenges. JPMorgan's stock strategist Mislav Matejka cautioned that the market has been overly optimistic recently, overlooking the accumulation of several adverse factors: global trade tensions remain unresolved, consumer confidence is weakening, and the topic of "stagflation" is back at the center of discussions.
Matejka believes that after a strong rebound, U.S. stocks may encounter the reality of weakened upward momentum in the coming summer. Especially against the backdrop of high geopolitical and policy path uncertainties, investors' expectations for valuation and growth might undergo adjustments.
Fed Maintains a Cautious Stance
Despite calls for rate cuts from both the market and political circles, the Federal Reserve remains cautious. Many Fed officials have expressed that it is still necessary to "continue observing" and closely watch the variables such as tariffs, oil prices, and overseas demand for their actual impact on inflation. As it stands, the Fed may only take the first rate cut action by September.
According to the CME's FedWatch tool, the likelihood of a rate cut in the June meeting is extremely low, making September the next key window of market attention.
Policy and Market Struggles Coexist
In summary, although Trump's renewed "call" represents a direct expression of political stance, whether its influence is sufficient to sway the Fed's independent decision-making mechanism remains to be seen. Although CPI tends to moderate, inflation has not completely returned to the target level, coupled with rising external uncertainties, causing the Fed's policy path to face more considerations.
Investors need to pay attention to the upcoming FOMC interest rate meeting results and the Federal Reserve Chair's statement, which will become a key indicator of future market trends.
