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China Merchants Macro: The Fed will find it difficult to cut interest rates as long as the inflation gap is higher than the employment gap

MetaEraJul 31, 2025
#Macro
On July 31 (UTC+8), China Merchants Macro Research reported that Powell is still concerned about the risk of stagflation, meaning that the Fed will find it difficult to cut interest rates as long as the inflation gap is higher than the employment gap. In June, the Fed gave a forward-looking assessment of the risk of stagflation, and this tone continued in July. Powell's concern about "inflation" is significantly higher than his concern about "stagnation." The most important statement is that "current inflation is above the target level, and employment is at the target level, so policies should remain moderately restrictive." What Powell needs to confirm is that the tariff inflation shock is fully reflected. [Techflow]
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China Merchants Macro: The Fed will find it difficult to cut interest rates as long as the inflation gap is higher than the employment gap

MetaEraJul 31, 2025
#Macro
On July 31 (UTC+8), China Merchants Macro Research reported that Powell is still concerned about the risk of stagflation, meaning that the Fed will find it difficult to cut interest rates as long as the inflation gap is higher than the employment gap. In June, the Fed gave a forward-looking assessment of the risk of stagflation, and this tone continued in July. Powell's concern about "inflation" is significantly higher than his concern about "stagnation." The most important statement is that "current inflation is above the target level, and employment is at the target level, so policies should remain moderately restrictive." What Powell needs to confirm is that the tariff inflation shock is fully reflected. [Techflow]
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