Recently, the financial market's expectation for the Fed to cut interest rates in September has reached an unprecedented height. Many voices indicate that the possibility of a rate cut has exceeded 90%. However, this almost unanimous judgment is likely a collective misunderstanding.

In fact, institutional investors on Wall Street are quietly withdrawing from this expectation, while retail investors continue to pour in in large numbers. This divergence has reached historic highs. More importantly, the latest economic data, including inflation indicators, employment data, and potential tariff impacts, do not support the argument for interest rate cuts.

Fed Chairman Powell will deliver a speech at the global central bank annual meeting on Friday. His core intention is likely to personally break the market's excessive expectations for interest rate cuts. If investors blindly follow market sentiment at this time, they may suffer significant losses.

So, why is the market so keen on a rate cut? According to data from the CME FedWatch tool, traders predict a 92% chance of a rate cut in September, indicating that almost everyone believes the Fed will definitely cut rates next month. However, historical experience tells us that the more consistent the market expectations are, the more likely they are to be wrong. The actions of the Fed often do not fully align with market expectations.

For example, in June 2023, the market generally believed that the Fed would soon cut interest rates, but Powell sent a hawkish signal. In January 2024, the market bet on a rate cut in March, but the Fed did not take action until June. This time, history is likely to repeat itself, as the latest economic data does not support the decision to cut rates.

Overall, the current economic indicators do not support the conditions for an interest rate cut. Investors should be cautious about the general market expectations and carefully analyze economic data and the Fed's signals to avoid potential investment risks.