CPI release: Is the economy in recession or soft landing?

The CPI data has not fluctuated for a long time. The CPI is the last key data before the Fed's interest rate meeting. This will be a decisive factor in whether the Fed will cut interest rates by 50 basis points at the September policy meeting. The Fed has never lowered borrowing costs so much at one time since the end of 2008, when the United States was in the worst financial crisis since the Great Depression.

One of the biggest questions facing investors at present is whether this Wednesday's inflation data clears the way for the Fed to cut interest rates by 50 basis points next week, which will be seen as good news or bad news.

Market analysis believes that if the Fed chooses to cut interest rates by 50 basis points next week, it will confirm the expectation of a US recession, which is bound to cause market panic. George Lagarias, chief economist at Forvis Mazars, said that a 50 basis point rate cut could scare financial markets.

In the mixed situation of the US economy, George Lagarias "firmly" stands in the camp calling for a 25 basis point rate cut. He believes that the current economic situation does not have the urgency of a 50 basis point rate cut. He said: "If the Fed cuts interest rates by 50 basis points, it may send a wrong signal to the market and the economy, making the market and economic participants mistakenly believe that the economic situation is very serious, thus causing panic. This may be a 'self-fulfilling' prophecy, leading to a real recession."

On Wall Street, this view was opposed by some analysts and economists. Michael Yoshikami, CEO of Destination Wealth Management, believes that a 50 basis point rate cut will show that the Fed is ready to act and will not send a signal of a recession. Coincidentally, Nobel Prize winner in economics Joseph Stiglitz said on Friday before the release of the non-farm report that the Fed should cut interest rates by 50 basis points at the September meeting because he believes that the Fed's previous policy tightening was "too much and too fast." He also believes that a large rate cut will help solve inflation and employment problems.

Morgan Stanley strategist Michael Wilson believes that if the Fed's first rate cut exceeds 25 basis points, the yen may be supported, prompting yen traders to withdraw US assets after domestic interest rates rise, repeating the pattern that caused global markets to fall into turmoil last month. Wilson wrote in a report: "The unwinding of yen carry trades may still be a potential risk factor for US stocks. The rapid decline in US short-term interest rates may further strengthen the yen, prompting US risk assets to react negatively."

Looking at the attitudes of the experts and institutions above, it should be clear that the long and short sides are now very controversial, and no one can convince anyone. There is no clear answer as to whether a 50 basis point rate cut is good or bad in the short term, but it is likely to be the opposite of the trend before September 17, so how institutions hype the next market has become very important.

From my point of view, I definitely hope that the index will plummet all the way to September 17, which is the most convenient to operate. After all, the market has formed a very regular trend, and it goes out of a large cycle every month. The next selling window is October 15, which is also quite clear. But if the index rebounds now, the next market will become unpredictable.