July FOMC Preview: If They Dare to Hike, We Dare to Buy the Dip

English summary

With the FOMC decision due at 2:00 AM on July 30, traders price a 38% probability of a July rate hike, one rate hike by September, and 1.7 cumulative hikes by December. This morning, Castle Securities suddenly called for the Fed to surprise with a rate hike in July, triggering a correction in precious metals. Castle Securities' reasons for calling a hike: ① Strengthen the determination to fight inflation; ② Prevent inflation stickiness from strengthening and reduce the degree of future monetary tightening. The Fed's July monetary policy implementation report also shows that current rates are lower than various Taylor rule prescriptions, and a mid-cycle adjustment is warranted. In addition, Wosh's idol Greenspan also surprised with a rate hike in 1994, curbing inflation and overheating in advance and extending the economic expansion cycle. But do not underestimate the resistance to a rate hike: ① The economy remains K-shaped, and traditional sectors, especially real estate, cannot withstand the turmoil of rate hikes. If 26Q3 economic data falls as we expect, a July hike would face the issue of 'reversal' in September; ② Trump's political resistance, he will not make the same mistake again by choosing an uncontrollable Powell 2.0; ...