In order to curb the persistently high inflation data, the US Federal Reserve (Fed) decided to keep the federal benchmark interest rate unchanged at the range of 5.25% to 5.5% in early May, freezing interest rates for the sixth consecutive time. However, the long-term high interest rate policy not only puts financial institutions under pressure to close down, but also indirectly changes people's consumption habits.
Extended reading: Report》Nearly 300 banks in the United States are facing bankruptcy! High interest rates create bad debt crisis
U.S. economic activity continues to expand, and the overall outlook becomes more pessimistic
Against this background, the U.S. Federal Reserve released its Beige Book yesterday (29th) stating that U.S. national economic activity continued to expand from early April to mid-May, with the economy in most regions growing at a "small or moderate" rate. However, economic expansion not only causes commodity prices to rise, but also indirectly forces people to change their consumption habits:
Retail spending was flat or slightly up, reflecting reduced consumer discretionary spending and increased price sensitivity
In addition, the Beige Book summarized the overall economic activity in the United States with a pessimistic description:
The overall outlook became more bearish as reports pointed to increased uncertainty and greater downside risks.
Fed official: The fourth quarter may be the time for the Fed to cut interest rates
On the other hand, Atlanta Federal Reserve Bank President Raphael Bostic said at a conference in Atlanta yesterday that the market still has a long way to go to curb the sharp price increases in the past few years.
However, although the current market inflation level is still high, Bostic believes that various indicators, mainly slowing inflation, may prompt the Federal Reserve to consider cutting interest rates in the fourth quarter of this year.
My view is that if things go the way I expect -- inflation slows, the labor market slows, and the economy settles into a slower but steady growth mode, then I would expect the fourth quarter of this year to be the year when we might actually consider and When preparing to cut interest rates
