Last week, the Federal Reserve announced a rate cut of 50 basis points, raising questions about whether such a drastic step is too aggressive.

A series of economic data to be released this week may provide clues to the future economic trend.

On Thursday, the final value of the U.S. second-quarter real GDP annualized rate and the second-quarter core PCE price index will be announced.

The former will serve as an important reference for measuring the performance of the U.S. economy, while the latter is the Federal Reserve's preferred inflation indicator.

In addition, at least eight Federal Reserve officials, including Powell, Vice Chairman for Supervision Michael Barr, and New York Fed President John Williams, plan to give speeches on Thursday, which may reveal key information about future rate cuts by the Fed.

Although the decision to cut rates by 50 basis points has boosted the stock market, especially with the S&P 500 and the Dow Jones Industrial Average both recording gains last week, the market's euphoria did not last long.

Concerns about economic growth are gradually emerging.

Advertisement

Despite easing price pressures, Powell's speech last week remained cautious, stating that "the fight against inflation is not yet won."

Is the U.S. economy still strong?

Investors will focus on the upcoming GDP and PCE economic data.

Meanwhile, several Fed officials will speak this week, and the market expects two more rate cuts this year, each by 25 basis points, with the possibility of further cuts in 2025 also being discussed.

Notably, despite the decline in inflation risks, Powell warned that a slowdown in the labor market could become a new challenge.

Analysts expect the PCE data to grow by 2.3% year-on-year, down from last month's increase of 2.5%.

If this data continues to decline, it will support the Fed's decision to cut rates.

Furthermore, as economic uncertainties increase, especially with the potential impact of the U.S. election, the market is concerned that premature easing policies might undermine the Fed's ability to achieve a 2% inflation target.

In terms of technology stocks, all Mag7 stocks except NVIDIA recorded gains last week.

Due to their interest rate sensitivity, investors closely monitor the Fed's policy changes to assess their impact on future growth.

This week, the Fed will continue to face dual challenges from economic data and the market.

Whether the pace of rate cuts is appropriate remains to be seen.