Recently, the financial market's expectations for the Fed to cut interest rates in September have become increasingly strong, with a predicted probability as high as 90.7%. This expectation is primarily based on the general consensus of economic slowdown, a cooling labor market, and improving inflation. However, we need to be cautious about the market's aggressive expectations regarding the subsequent policy path.

The market almost assumes that interest rate cuts will continue, with an expected probability of only 4.5% for maintaining the interest rate in October. This high level of certainty may carry risks. In fact, the Fed's decisions will strictly depend on the future trend of inflation, especially the stickiness of core services inflation and changes in employment data. Any fluctuations in data could disrupt the rhythm of market expectations.

There are differences in the market regarding the cumulative rate cuts for the year. The expected probability of a 25 basis point cut is 48.9%, while the expected probability of a 50 basis point cut reaches 46.5%, making both viewpoints nearly evenly matched. This divergence reflects the core uncertainty of the current macroeconomic outlook.

My main point is that a 25 basis point rate cut in September is the most likely starting point. Whether there will be another 25 basis point cut or a quicker move to 50 basis points will depend on market performance. Reasons supporting a larger rate cut may include increased economic downside risks or a clear improvement in inflation trends. On the other hand, a preference for a moderate rate cut may stem from inflation not yet reaching targets or the economy showing unexpected resilience.

Currently, the market seems to have high expectations for a 'soft landing + 50 basis point rate cut'. However, we cannot ignore the possibility of inflation stickiness or economic resilience exceeding expectations. In this case, the risk of only cutting rates once by 25 basis points for the whole year, or even delaying subsequent actions, is also present.

Overall, although the market is full of expectations for the Fed's interest rate cuts, there are still many uncertainties regarding the actual policy direction. Investors should remain vigilant and closely monitor changes in economic data, as well as the policy statements from Fed officials, in order to adjust their investment strategies in a timely manner.