Oil prices are plummeting! The global economic growth outlook is bleak. Will the Federal Reserve (FED) cut interest rates this June?

There has been a major event with crude oil prices! Due to the impact of OPEC+ member countries expanding crude oil production, Brent crude oil futures plummeted by 4.6% shortly after the market opened this morning, approaching $58 per barrel; WTI crude oil futures also saw a dramatic drop of 5%, falling below $56. The international crude oil prices are in a free fall, which is not a good sign for the global economy.
Of course, the recent fall in crude oil prices is mainly due to the expected increase in crude oil supply. However, from the demand side, there has not been a significant rise in current crude oil demand, and there are even signs of demand contraction. The root cause lies in the fact that major consumer economies, led by the United States, are showing signs of slowing economic growth or even stagflation.
The fall in oil prices is certainly a good thing for suppressing inflation, but this is mainly reflected in countries with high inflation levels. For manufacturing powerhouses like "Dongda", the continuous decline in oil prices may further lead to a passive "deflation" scenario in the economy, which is not conducive to the improvement of CPI and the boost of the large consumer industry, thus affecting the increment of the macro economy.
The recent fall in international oil prices is also influenced by Trump's pressure on Saudi Arabia, aimed at suppressing the inflation level in the United States and urging The Federal Reserve (FED) to cut interest rates as soon as possible. Trump has repeatedly called out to FED Chairman Powell, urging him to activate the interest rate cut strategy soon; however, Powell currently insists that there are no significant issues with the U.S. economy, especially under the impact of the tariff war, where U.S. inflation expectations are strengthening, and the conditions for cutting interest rates are not yet met.
In fact, from a macroeconomic perspective, the total GDP of the United States shrank in the first quarter of this year, partly due to fluctuations in imports, which are certainly related to the tariff war. However, companies' inventories can still be maintained for a while, which will appropriately delay the negative effects brought about by the tariff war. In addition, the U.S. non-farm data in April this year significantly exceeded expectations, indicating that the domestic unemployment rate remains at a low level, and expectations for interest rate cuts are declining.
According to recent CME data forecasts, the probability of the Federal Reserve (FED) keeping interest rates unchanged in May this year is as high as 94.4%, but the probability of a cumulative rate cut of 25 basis points in June is around 65.5%. The market generally bets on a rate cut starting in June, but this probability cannot be considered too high at the moment, as the predicted probability has not yet reached over 80%.
According to the forecasts from the international investment bank Goldman Sachs, they believe that starting from June this year, The Federal Reserve (FED) will consecutively cut interest rates three times, each by 25 basis points. On the other hand, Morgan Stanley expects one rate cut before June, but will mainly adopt a wait-and-see approach thereafter. It is clear that Goldman Sachs' forecast for interest rate cuts this time is more aggressive.
After the recent crazy fall of international oil prices, if the oil prices can maintain a sluggish oscillating downward trend in May, then by June, the inflation rate in the United States is expected to further decrease, and the data at that time may provide support for The Federal Reserve (FED) to cut interest rates.
In addition, about 6.5 trillion of U.S. Treasuries will mature in June this year, and the yield on 10-year U.S. Treasuries remains high at around 4.31%, still staying elevated, which poses a significant pressure on U.S. finances. The Federal Reserve (FED) can save U.S. Treasuries by lowering interest rates and reducing U.S. Treasury yields to ensure their credit and liquidity. This should be the core reason why Trump has repeatedly urged the Federal Reserve (FED) to cut interest rates.
In addition, the international gold price surged sharply in April, while at the same time, the price of U.S. Treasuries experienced a significant fall, which severely damaged the hedging value and liquidity of U.S. Treasuries. To protect the asset hedging value and liquidity of U.S. Treasuries, Wall Street will subsequently use the power of capital to crazily suppress the international gold price, allowing some funds to enter the market and take over U.S. Treasuries.
If the international gold price and international oil price showed a similar trend in May, both experiencing a continuous fall, then it would be a natural thing for the Federal Reserve (FED) to cut interest rates subsequently.
Based on the above analysis, the author believes that the possibility of the Federal Reserve (FED) lowering interest rates in June this year should be over 80%. After all, at this current time point, the Federal Reserve's biggest task is to save U.S. debt. Once U.S. debt credit collapses, the international credit of the U.S. dollar will inevitably be significantly damaged, which will directly threaten the global hegemony of the U.S. dollar.
After the Federal Reserve (FED) cuts interest rates, our central bank will likely follow suit quickly. Here, we have been saying that we will "selectively" lower interest rates for almost half a year now. Once that happens, the capital market will likely react significantly. The key indicator for the market to observe will be the securities firms, and investors can wait and see.
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