China-Singapore Jingwei, February 1 (Dong Wenbo and Fu Jianqing) In the early morning of February 1, Beijing time, the Federal Reserve’s first interest rate decision of the new year was released, and the decision to keep the policy unchanged was in line with the general expectations of investment banks.
The Federal Reserve released the latest policy statement of the Federal Open Market Committee (FOMC), keeping the benchmark interest rate unchanged at a range of 5.25%-5.50%. The statement showed that the committee believed it would not cut interest rates until it was more confident that inflation was close to 2%, and reiterated that inflation has eased over the past year but remains high. However, the relevant wording of "possible further tightening of policies" was deleted from the statement.
After the announcement of the above-mentioned resolution, U.S. stocks fell short-term, and the yield on U.S. two-year Treasury bonds once reached 4.3%.
Federal Reserve Chairman Powell said at a subsequent press conference that the economy has made good progress, inflation has eased, and it is still committed to returning the inflation rate to 2%.
Powell said he hopes that inflation data will continue to decline in the second half of the year, and it may be appropriate to start cutting interest rates at some point this year
. "If the economy develops as expected, we will adjust policy rates this year."
However, Powell also pointed out that lowering policy rates too late could unduly weaken the economy, while cutting interest rates too early could lead to a reversal of inflation progress. "If necessary, we are prepared to maintain current policy rates for an extended period of time."
So, at what pace will the Fed cut interest rates this time?
In this regard, the chief economist of CITIC Securities clearly believes that based on the current economic situation in the United States, if the U.S. economic growth slows down, the Federal Reserve may cut interest rates as a precautionary measure this year, and the rate of interest rate cuts may be 75-100bps.
Mingming expects that the support of U.S. consumption will gradually weaken in the first half of this year, and the recent average level of month-on-month growth in consumer spending is close to the danger threshold. Therefore, if U.S. consumption declines further, the probability of triggering an interest rate cut signal in the first half of this year is relatively high. At the same time, the month-on-month annualized rate of corporate investment in fixed investment is currently close to the 0% threshold, and it is expected that the probability of exceeding the threshold will be high in the first half of this year. In terms of superimposed liquidity, short positions in U.S. Treasury bond futures of overly leveraged funds will take a period of time to be gradually and orderly closed.
It is expected that the probability of a preventive interest rate cut by the Federal Reserve near the middle of this year is relatively high
.
According to the Chinese website of the Wall Street Journal, Dean Maki, chief economist of hedge fund Point72 Asset Management, believes that the
Federal Reserve will not cut interest rates until June
because U.S. economic growth and hiring this year will exceed the Federal Reserve’s expectations. Maki said concerns that lower inflation would raise real interest rates were unjustified because lower inflation would also boost purchasing power, consumer confidence and spending.
"When inflation falls, economic growth also strengthens. Over the past few decades, I can't think of an example of growth weakening after inflation fell," Maki said.
In addition, Debon Securities also reminded that no matter how the interest rate cut expectations change, the current inversion of the term spread of long-term and short-term U.S. bond rates still tends to narrow, so it maintains the judgment that "the growth of small and medium-sized U.S. stocks and the relative dominance of short-term U.S. bonds" .
In terms of China's monetary policy, starting from January 25, the central bank has lowered the re-lending and rediscount rates to support agriculture and small businesses by 0.25 percentage points; and will lower the deposit reserve ratio by 0.5 percentage points on February 5 to provide long-term liquidity to the market. 1 trillion yuan.
Guan Tao, global chief economist of BOC Securities, said that given that the Fed's tightening has reached an inflection point, it may also have a certain improvement effect on equity assets such as stocks. Guan Tao said that in 2024, China's macro-monetary environment may be to ease credit and stabilize currency. Coupled with rising corporate profits, it is expected that A-shares may be dominated by small and medium-sized growth styles. (China-Singapore Jingwei APP)
(The opinions in this article are for reference only and do not constitute investment advice. Investment is risky, so please be cautious when entering the market.)
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