In the latest Fed interest rate decision, the federal funds rate remains unchanged at 4.25%-4.50%. However, internal divisions are increasingly intensifying, with two key members suggesting for the first time that interest rate cuts should begin, believing that the economy may be weakening and that action should be taken in advance.

However, Fed Chairman Powell has a cautious attitude towards a rate cut in September, stating that further observation of economic data is needed. This statement has caused market expectations for a rate cut in September to plummet from 65% to 45%, and a rate cut within the year may be pushed back to November or December.

Currently, the core PCE remains above expectations, holding at 2.5%. Meanwhile, tariff policies have caused the prices of many goods to rise by 30%-40%, which puts the Fed in a dilemma regarding interest rate cuts: cutting rates may trigger a rebound in inflation, while not cutting rates could impact economic growth.

Economic indicators present a complex situation: GDP growth of 3% in the second quarter, technology stocks continue to rise; however, demand in the real estate market has dropped by 3.8%. Although the unemployment rate remains at a relatively low level of 4.1%, potential risks cannot be ignored.

Powell emphasized that the Fed's primary task is to maintain full employment and stability in the labor market, and will not consider the increased costs from the government, which seems to lower the possibility of a rate cut in September.

The future direction will heavily depend on the economic data from August. If the core Intrerest Rate falls below 2.3% and new job additions are under 70, the probability of a rate cut in September may rise to 70%. However, if the inflation rate is pushed up by tariffs to above 2.8% or GDP growth slows down to below 2%, a rate cut may not happen this year.

For investors, it is recommended to temporarily avoid high-valuation tech stocks that are sensitive to the Intrerest Rate, maintain a high cash holding ratio, and wait for the data to be released in August. If the Fed signals a preventive interest rate cut, consider purchasing U.S. Treasury bonds.

Overall, the Fed is seeking a balance between economic growth and inflation control. On one hand, there is pressure to cut interest rates, while on the other hand, it must weigh the impacts of data and tariffs. The direction of policy will largely depend on the economic data performance in August.