BOCOM INTL: The Fed cuts interest rates for the first time in the fourth quarter of the year, with the impact of tariffs lagging behind.

BOCOM INTL publishes a report indicating that on July 31, the Federal Reserve unanimously decided to maintain the federal funds rate target range at 4.25% to 4.5%, which is the fifth consecutive meeting to press the pause button on interest rate cuts, in line with market and the bank's expectations. Powell downplayed expectations of a rate cut in September, stating that no decision has been made for the September meeting, which also dampened market enthusiasm for a rate cut in September. After the meeting, the probability of a rate cut in September decreased from about 65% to around 45%, and the overall expectation of rate cuts for the year also declined. At the current point in time, the Fed's patience in cutting rates is reasonable, as the impact of tariffs has a lag effect and has not fully manifested yet. It may still require waiting for future inflation data over the next two months, such as the transmission of commodity price pressures, before observing two complete rounds of employment and inflation data before the September meeting. In the base case scenario, the credit risk of the U.S. dollar, especially the trend of the capital markets, has become a weakness for Trump, which may limit his advocacy for tariffs and firing Powell. It is expected that by the end of 2025, there will be 1-2 rate cuts for the year, with the first rate cut possibly occurring in the fourth quarter.