JPMorgan Chase: Two major factors constrain the Federal Reserve from initiating interest rate cuts, and the final decision often lags behind the economic situation

BlockBeats News: On May 7th, JPMorgan Chase pointed out that when the Federal Reserve is in a dilemma due to conflicting macroeconomic data, its final decision often lags behind the situation. Trump is increasingly urging the Federal Reserve to lower interest rates, but the Fed is currently in a difficult situation. Morgan Stanley analysts say that it is almost impossible for the Federal Reserve to cut interest rates at the May policy meeting this week, and the likelihood of a rate cut at subsequent meetings is also low. JPMorgan Chase believes that there are two reasons why Federal Reserve officials are constrained in monetary policy. One reason is that rising inflation expectations make it difficult for the Federal Reserve to initiate interest rate cuts. The latest consumer inflation report shows that inflation in March increased by 2.4% year-on-year, exceeding the Federal Reserve's target of 2%. Compared to possible future scenarios, this number is still quite low: the one-year inflation expectation compiled by the University of Michigan is 6.5%. Trump's tariff policy is expected to increase costs for consumers, which is the main driving factor behind the significant rise in inflation expectations. The concerns caused by the trade war have intensified the risk of stagflation, which is the possibility of the US economy falling into a situation of stagnant growth and sustained price increases. In this situation, the Federal Reserve is actually in a dilemma as it cannot address both issues simultaneously. The second reason is that macro data has not yet shown the necessity of interest rate cuts. The current encouraging data masks the issue of inflation expectations, and macroeconomic data continues to remain strong, even showing relatively strong performance in some aspects. Last Friday's unexpectedly positive non farm payroll report for April boosted investor confidence and pushed the stock market up. In other words, the market is not pricing for an impending recession. Morgan Stanley's analyst wrote: 'The forward P/E ratio of the S&P 500 index (SPX) is currently 21 times, and earnings per share (EPS) are expected to increase by 10% this year and 14% next year.'. This far does not reflect a clear concern about the recession