The market generally believes that a 25 basis point rate cut by the Federal Reserve in September is almost a foregone conclusion. However, what is more concerning is whether the rate cut could be larger, such as a direct cut of 50 basis points. This possibility does exist, but it depends on whether U.S. economic data deteriorates further.

The PPI data for August released yesterday showed a month-on-month decrease of 0.1%, marking the first negative growth in four months and significantly lower than the market expectation of 0.3%. Year-on-year, it grew by 2.6%, also well below the expected 3.3%. This data further strengthens the market's expectations for a rate cut by the Federal Reserve in September.

The core CPI data to be announced tonight is crucial. If the data performs worse than expected, the likelihood of the Federal Reserve exceeding expectations by cutting interest rates by 50 basis points in September will increase.

Interestingly, although the stock market is often seen as a barometer of the economy, the current market seems more inclined to see weakening U.S. economic data. This is because the stock market is more sensitive to monetary policy than to economic indicators. Loose monetary policy often injects momentum into the stock market, driving up stock prices. In contrast, the impact of economic data on the stock market is neither as direct nor as significant in terms of timing and magnitude as that of monetary policy.

Therefore, from the perspective of the stock market, it is not difficult to understand the market's expectation for a more aggressive rate cut by the Federal Reserve. Investors are closely monitoring the upcoming core CPI data to assess the actions that the Federal Reserve may take and their potential impact on the financial markets.