Zhongxin Jingwei, September 9 (Zhang Shunan, Wan Keyi) Following the last Fed interest rate hike to the highest interest rate in 21 years, in the early morning of the 22st Beijing time, the Federal Reserve announced a suspension of interest rate hikes! So when will the rate cut channel open?

The pace of interest rate hikes is on hold

After the two-day meeting, the Fed announced a pause in rate hikes, leaving the target range of the federal funds rate unchanged at 5.25%-5.5%.

After the Fed's interest rate decision, the three major indexes of U.S. stocks plunged short-term, and as of press time, the Dow narrowed its gains to 0.3%, the NASDAQ fell 0.41%, and the S&P 500 fell 0.11%.

Fed Chairman Jerome Powell said at a press conference on the same day that there is still a long way to go to reduce inflation to 2%, long-term inflation expectations remain well anchored, inflation has eased since the middle of last year, and the Fed is committed to achieving and maintaining sufficiently restrictive policies to bring inflation to 2% over time.

Will interest rates still be raised in the fourth quarter?

According to the US Department of Labor, the US consumer price index (CPI) rose 8.3% year-on-year in August, an increase of 7.7 percentage points from July; the core CPI rose 0.5% year-on-year, still well above the long-term target of 4%. This is the second consecutive month that year-on-year CPI growth in the United States has rebounded and recorded the largest month-on-month increase in 3 months.

Lu Zhe, chief economist of Deppon Securities, analyzed that the rise in oil prices and low base pushed up the CPI year-on-year rebound in August, and core inflation continued to decline year-on-year, but non-residential core service inflation rebounded again, or strengthened inflation stickiness, and the year-on-year growth rate of US CPI may be difficult to fall below 8% this year.

Now that the US CPI is still far from the 2% target, will interest rates be raised this year?

Zhongxin Jingwei noted that Powell stressed at the press conference on the same day that he would hold meetings one by one to make decisions, and would be ready to raise interest rates further if the situation was appropriate; The Fed's forecast is not a plan, and policy will be adjusted as appropriate; It was never intended to signal the timing of any rate cuts, and there will be a time to cut rates in due course.

Lu Zhe believes that in the short term, the recovery of commodity prices and the strike of US auto manufacturing workers may bring upside risks to inflation, or push up the probability of interest rate hikes in November again. In the medium and long term, the tail risk of a second rise in inflation from energy, replenishment, supply chain and demand resilience means that there is still a distance to cut interest rates, and it is expected that the Fed will not be able to start cutting interest rates before the second half of 11.

Chen Xing, chief analyst of Caitong Securities, believes that the asset book losses of financial institutions caused by interest rate hikes are difficult to properly solve before interest rate cuts, and the banking crisis is not over. Although the Fed's use of liquidity tools has fallen recently, it is still at a high level, and existing risks are more concentrated in the small and medium-sized banks and non-bank institutions. As restrictive interest rates continue, there is still the possibility of a recession, at which time interest rates may be passively cut.

What's next for the People's Bank of China?

On the eve of the Fed's interest rate decision, China's central bank cut the RRR for the second time this year.

On September 9, the PBOC lowered the reserve requirement ratio of financial institutions by 15.0 percentage points (excluding financial institutions that have implemented a 25% reserve requirement ratio).

Zhou Maohua, macro researcher of the financial market research department of China Everbright Bank, said that the central bank's RRR reduction was basically in line with market expectations. The main reason is that the central bank has increased its efforts to stabilize growth, boost market confidence in economic recovery, and consolidate the trend of economic stabilization.

In addition, near the end of September, the National Day holiday is coming, and the market liquidity demand will rise simultaneously, which also requires corresponding financial support to help the market overcome the impact of special time points.

Zou Lan, director of the Monetary Policy Department of the People's Bank of China, said on the 20th that there is still sufficient policy space for monetary policy to respond to unexpected challenges and changes. The People's Bank of China will continue to implement a prudent monetary policy accurately and effectively, strengthen counter-cyclical adjustment and policy reserves, and promote high-quality development with high-quality financial services.

In terms of exchange rate, Zou Lan said that the exchange rate of RMB against the US dollar is very important, but it is not the whole of the RMB exchange rate, and it should be viewed comprehensively and pay more attention to the changes in the exchange rate of RMB against a basket of currencies. In the next stage, the People's Bank of China and the State Administration of Foreign Exchange will aim to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level, base themselves on the long term, develop the present, take comprehensive measures, correct divergences, and stabilize expectations, resolutely correct unilateral and pro-cyclical behaviors, resolutely deal with behaviors that disrupt market order, and resolutely prevent the risk of exchange rate overshoot.

Zhou Maohua analyzed that the domestic policy space is still sufficient, but the short-term RRR reduction and interest rate reduction threshold has been raised, mainly because the economy has shown a stable and good trend, the central bank has made efforts one after another, and the policy effect is gradually released, which requires maintaining a certain degree of patience and determination, and at the same time, excessive easing policy may have potential risks. (Zhongxin Jingwei APP)

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