CMB Macro: As long as the inflation gap exceeds the employment gap, it will be difficult for the Federal Reserve to cut interest rates

According to ChainCatcher, citing a macroeconomic research report from CMB International via Jintou Data, Powell remains concerned about the risk of stagflation, which means that as long as the inflation gap exceeds the employment gap, it will be difficult for the Federal Reserve to cut interest rates.

In June, the Federal Reserve provided a forward-looking assessment of stagflation risks, and this tone continued in July. Powell’s concern about “inflation” is clearly greater than his concern about “stagnation.” The most important statement is that “current inflation is above the target level, while employment is at the target level, so policy should remain appropriately restrictive.” What Powell needs to confirm is that the inflationary impact of tariffs has been fully reflected.