Visionary · Money Fund Weekly | Non-farm payroll data exceeds expectations! Tariff progress affects market nerves, US May CPI data is about to be revealed!

Issue 202523

According to CME FedWatch, the probability of maintaining unchanged interest rates in June is 99.9%.

Recently, U.S. President Trump continued to pressure Powell to cut interest rates. Trump stated that he would urge Powell to cut rates by 100 basis points, accusing Powell of maintaining high interest rates, which led to a loss of national wealth and increased borrowing costs for the federal government. Trump also said that the appointment result of the next Fed chair will be announced soon, and he has a fairly clear idea of the candidate.

In terms of data, the strong U.S. May non-farm payrolls released last Friday showed an addition of 139,000 jobs, exceeding market expectations, but previous figures and March data were revised down by a total of 95,000. After the data release, traders reduced their bets on Fed rate cuts this year. This Wednesday, the U.S. May Consumer Price Index (CPI) report will be released, which may provide clues for the market to observe the future direction of Fed monetary policy. Economists generally believe that May prices will begin to reflect tariff impacts.

The Fed is about to enter the blackout period ahead of the mid-June monetary policy meeting, and officials are almost certain to keep rates unchanged. The market widely expects the Fed to maintain rates unchanged at this meeting, but traders have begun betting on two 25-basis-point rate cuts in the second half of the year.

According to CME FedWatch, the probability of maintaining unchanged interest rates in June is 99.9%, while the probability of maintaining unchanged rates by July is 83.52%, with a cumulative probability of a 25-basis-point cut at 16.48%.

The biggest uncertainty this week comes from tariff policies. On one hand, China and the U.S. will hold the first meeting of the economic and trade consultation mechanism in London; on the other hand, the U.S. Court of Appeals for the Federal Circuit (CAFC) may rule in the coming days on whether to permanently overturn the U.S. Court of International Trade (CIT) ruling that blocked Trump's "reciprocal tariffs."

In other central bank news, on June 5 local time, the European Central Bank (ECB) announced a 25-basis-point cut in its three key interest rates, with the main refinancing rate reduced to 2.0%. This marks the eighth rate cut since June last year, in line with market expectations. ECB President Christine Lagarde stated at a press conference that "the monetary policy cycle is coming to an end." The market widely predicts that the ECB will temporarily keep rates unchanged at the July meeting and may cut rates again in September.

Fed Movements & Data Releases

June 7, 2025

Fed's Moussalem: Tariffs May Push CPI Higher for One to Two Quarters

Fed's Moussalem stated that tariffs may push CPI higher for one to two quarters; the possibility of tariffs triggering sustained inflation is "fifty-fifty"; the Fed may face uncertainty throughout the summer, and political interference could make rate cuts more difficult.

June 6, 2025

Fed's Harker: Fed May Still Cut Rates Later This Year

Fed's Harker stated that deficits must be controlled as the U.S. financial system faces growing challenges, expressing "great concern" over the current government fiscal situation; in terms of key data, we are becoming more blind, and we worry that the quality of economic data is declining; uncertainty makes predicting monetary policy prospects very difficult; but amid uncertainty, the Fed may still cut rates later this year.

Fed's Schmid: Don’t Take Tariff-Driven Price Increases Lightly

Fed's Schmid expressed concerns that tariffs could reignite inflation, saying price pressures may emerge in the coming months, though their full impact may take longer to materialize.

U.S. May Non-Farm Payrolls Add 139K, Lowest Since February, Previous Two Months Revised Down by 95K, Unemployment Rate at 4.2%

Data from the U.S. Bureau of Labor Statistics showed that employment increased by 139,000, the lowest since February but slightly above market expectations of 126,000. However, employment figures for the previous two months were revised down by a total of 95,000, a revision large enough to offset the seemingly positive performance.

June 5, 2025

Fed Governor Kugler: Most Fed Officials Worry About Inflation, Not Growth

Fed Governor Kugler stated that tariffs may bring higher inflation risks, hence supporting the current decision to keep rates unchanged; most Fed officials worry about inflation rather than growth; one-way rising fiscal deficits may affect the Fed, pushing up the neutral interest rate.

Fed's Kashkari: Fed Must Wait and See Amid Economic Uncertainty

Fed's Kashkari stated that the labor market shows signs of slowing; we are still not fully back to the 2% inflation target; amid economic uncertainty, the Fed must wait and see.

U.S. Initial Jobless Claims Unexpectedly Surge to 247K, Highest in Eight Months

Data from the U.S. Labor Department showed that initial jobless claims for the week ending May 31, which included Memorial Day, rose by 8,000 to 247,000, far exceeding economists' expectations of 235,000.

June 4, 2025

Fed Governor Cook: Tariffs Increase Likelihood of Cooling Labor Market and Rising Inflation

Fed Governor Cook stated that trade policy may make reducing inflation more difficult, with evidence showing trade policy is currently affecting the economy; tariffs increase the likelihood of a cooling labor market and rising inflation.

June 3, 2025

Fed's Bostic: Long Way to Go in Fighting Inflation, Still Expects One Rate Cut This Year

Fed's Bostic stated that more progress is needed in lowering inflation before supporting rate cuts; still believes there may be one rate cut this year, depending on economic conditions. There is a long way to go in fighting inflation, and core prices "remain a problem."

Fed's Goolsbee: If Trade Risks Fade, Rate Cuts Can Proceed

Fed's Goolsbee stated that if the U.S. economy continues its current trajectory and tariff measures ultimately prove less aggressive than initially announced, the Fed's policy rate is "very likely to be significantly lower" over the next 15 months; the labor market remains strong, and the latest inflation data is also positive; given the experience during the COVID-19 pandemic, it is hard to assert that tariff impacts are only temporary.

June 2, 2025

Fed's Logan: Fed Can Be Patient, Ready to Act if Necessary

Fed's Logan stated on Monday that with a stable labor market, inflation slightly above target, and an uncertain outlook, the Fed is closely monitoring a range of data to determine what actions may be needed and when; our job is to ensure that one-time price increases do not become a persistent inflation problem.

Fed Governor Waller: No Evidence of Long-Term Inflation Rise, Still Expects Rate Cuts Later This Year

Fed Governor Waller stated that tariffs will push inflation higher "in the coming months," supporting the approach of ignoring short-term price increases as long as inflation expectations remain stable when formulating policy; assuming the effective tariff rate is close to the lower-tariff scenario, underlying inflation continues to progress toward the 2% target, and the labor market remains robust, he would support a "good news" rate cut later this year.

Other Central Bank Movements

June 7, 2025

BOE's Greene: Short-Term Price Rebound, But Disinflation to Continue

Bank of England Monetary Policy Committee member Greene stated that the disinflation process is still ongoing, although inflation has actually risen in recent months and is expected to continue rising in Q3 this year; despite short-term price peaks, inflation is expected to continue declining toward the 2% target in the medium term.

ECB's Vujcic: This Rate Cut Cycle Nearing Its End

ECB Governing Council member Vujcic stated that the ECB's rate-cutting actions are nearing their end; if June economic projections materialize, the current monetary policy stance is appropriate; continuous comparison of the latest data with projection models is crucial, as inflation exceeding expectations or GDP growth unexpectedly weakening (or vice versa) will influence judgments on appropriate interest rate levels.

June 6, 2025

ECB's Centeno: Rate Cycle May Be Nearing End and Stabilizing

ECB Governing Council member Centeno stated that U.S. tariffs have a disinflationary effect; it is unclear how fast rate changes will occur; rates will stabilize around 2% for some time; the ECB's rate cycle may be nearing its end and stabilizing.

ECB's Holzmann: Current Monetary Policy Is Loose State

ECB Governing Council member Holzmann stated that lowering rates during periods of high savings and low investment has no effect beyond monetary impact; dissented from this week's rate decision; current monetary policy is in a loose state; ECB President Lagarde said we are at the end of the cycle, and I hope to discuss whether this is indeed the case.

ECB's Stournaras: If Economy Weakens and Inflation Falls, ECB May Cut Rates

ECB Governing Council member Stournaras stated that if the economy weakens and inflation falls, the ECB may cut rates; economic growth faces downside risks; the ECB's rate-cutting pace is nearing its end; given uncertainty, one can never say things are done. The ECB's best choice is to wait and see.

ECB's Kazaks: Markets Should Not Expect Rate Cuts at Every Meeting

ECB Governing Council member Kazaks stated that markets should not expect rate cuts at every meeting, with a high likelihood of a pause in July; expects inflation to remain below 2% for some time, and we must remain vigilant; unless we deviate from the baseline scenario, further rate cuts will be seen as fine-tuning.

ECB's Müller: Rate Cut Cycle Nearing Its End

ECB Governing Council member Müller stated that we can be satisfied with the current inflation level, agreeing with Lagarde's view that the (rate cut) cycle is nearing its end; it is hard to say what the next step for rates will be; we face above-average uncertainty.

June 5, 2025

ECB Cuts Rates by 25BP as Expected

The ECB cut its deposit facility rate by 25 basis points to 2%, in line with market expectations, marking the seventh consecutive meeting with a rate cut. The main refinancing rate and marginal lending rate were cut from 2.4% and 2.65% to 2.15% and 2.4%, respectively, the lowest levels since early 2023.

ECB's Lagarde: Monetary Policy Cycle Coming to an End

ECB President Lagarde stated that after the 25-basis-point cut, we are in a good position; the monetary policy cycle is coming to an end; most core inflation indicators show prices "on track to stabilize"; fragmentation of global supply chains "may remain a potential risk pushing inflation higher."

June 3, 2025

BOJ's Ueda: If Economy and Prices Meet Expectations, Will Continue Rate Hikes

BOJ Governor Kazuo Ueda stated that trade policy uncertainty is extremely high; the Japanese economy is in a moderate recovery, though showing some signs of weakness; if the economy and price trends meet expectations, rate hikes will continue; the BOJ will not pre-set interest rate policy or push for hikes to create room for future cuts.

BOE's Bailey: If Inflation Risks Falling Below Target, May Accelerate Rate Cuts

Bank of England Governor Andrew Bailey stated that there is currently no reason for the BOE to abandon its gradual rate-cut policy; if officials find inflation threatening to fall below the 2% target, they will need to abandon cautious cuts and take more aggressive action.

$S&P 500(.SPX.US) $Hang Seng Index(00HSI.HK) $Hang Seng TECH Index(STECH.HK) $Dow Jones Industrial Average(.DJI.US) $NASDAQ Composite Index(.IXIC.US)