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This week, Federal Reserve Chairman Jerome Powell unexpectedly struck a dovish tone at the Jackson Hole Central Bank Annual Meeting, hinting that the Fed may be receptive to interest rate cuts. This announcement has spurred a wave of rate cut expectations in US asset markets, leading to a depreciation of the dollar, a decline in 10-year US Treasury yields, and a rebound in US equities. Analysts predict that the Federal Reserve could initiate interest rate reductions as early as September. However, given the cautious approach and ongoing inflationary pressures, the pace of these cuts is not anticipated to be swift, with a maximum of two reductions likely within the year. In contrast, the European Central Bank is expected to keep interest rates unchanged in September, as inflation is no longer a significant concern.
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