The U.S. Treasury Secretary calls for a 50 basis point rate cut in September, with the futures market estimating the probability at only 0.1%

According to Zhitong Finance APP, after inflation did not show a significant rebound in July, U.S. Treasury Secretary Becerra stated in an interview with foreign media on Wednesday that the Federal Reserve should significantly cut interest rates by 50 basis points at the upcoming September meeting and initiate a series of rate cuts. He said, "If you look at any model, it shows that rates should be 150 to 175 basis points lower than the current level."

Becerra's remarks have slightly increased market expectations for a one-time 50 basis point rate cut in September, but it remains at an extremely low level. According to the CME FedWatch tool, the market currently assigns only a 0.1% probability to this scenario, while foreign media estimates it slightly higher at 1.4%. In contrast, a 25 basis point rate cut in September has almost been fully priced in by the market. Louis Navellier, founder of Navellier & Associates, also supports Becerra's view but warns that the Federal Reserve may be concerned that a significant rate cut could be interpreted as a "panic signal" by the outside world.

Several economists have pointed out that the non-farm payroll data for August, to be released on September 5, will be an important reference for the Federal Reserve's decision-making. If the data significantly worsens, especially if there is a reduction in jobs for the month, accompanied by revisions of June or July data to negative values, and the unemployment rate rises from 4.2% to 4.4%, it could prompt a larger rate cut. However, PNC Chief Economist Gus Faucher believes that unless such a "very bad" situation occurs, the Federal Reserve is still likely to choose a 25 basis point cut.

In July, the U.S. CPI rose 2.7% year-on-year, roughly in line with expectations, alleviating concerns about uncontrolled inflation amid tariff increases. However, the core CPI year-on-year growth rate has reached 3.1%, and the "super core CPI," excluding housing, energy, and food, rose 0.5% month-on-month, reaching the second-highest level in nearly 18 months. Omair Sharif, founder of Inflation Insights, pointed out that the increase in core commodity prices is broader than in June, and the transmission effects of recent tariffs have already manifested in most categories.

According to the economic forecast summary released by the Federal Reserve in June, core PCE inflation is expected to be 3.1% by the end of this year. The current core CPI has reached this level, while the impact of tariffs continues to permeate. This may lead officials to remain cautious about larger rate cuts amid slowing employment. In July, the U.S. added only 73,000 non-farm jobs, and the employment increases for May and June were significantly revised down to 19,000 and 14,000, respectively, but the unemployment rate remained at 4.2%.

Recent statements from Federal Reserve officials indicate that although Governor Bowman and Waller lean towards a 25 basis point cut, the majority of committee members still lean hawkish in the context of inflation being above the 2% target for 53 consecutive months. Richmond Fed President Barkin stated this week that he would adjust the policy stance based on further clarity in economic conditions but did not release a clear signal of a shift to a dovish stance.

Jon Hilsenrath, a senior advisor at StoneX, pointed out that even if the July inflation data provides the Federal Reserve with some room for rate cuts, it does not mean that there will be another cut in October. Currently, the futures market assigns a 69% probability to another rate cut in October, but he believes this expectation is "too optimistic," predicting that the Federal Reserve may only cut rates twice this year, with the second cut more likely to occur in December