Text/Xia Bin

　　On the 20th New York time, a rare scene occurred in the U.S. stock market. The three major indexes collectively hit a record closing high!

　　On the same day, the Federal Reserve announced that it would keep the target range for the federal funds rate unchanged at 5.25% to 5.5%.

　　U.S. stocks are soaring, what else will the Fed do?

Interest rate cut expectations remain unchanged, market reaction is positive

　　Judging from the content released at this interest rate meeting and the latest dot plot, the Federal Reserve continues to maintain policy interest rates and the pace of balance sheet reduction unchanged, and has raised its forecasts for core inflation and economic growth this year. However, it has maintained its forecast for three interest rate cuts this year, and revised Lowered expectations for the number of interest rate cuts next year.

　　In terms of economic forecasts, this month the Federal Reserve significantly revised the U.S. GDP forecast for 2024 to 2.1%, compared with the previous forecast of 1.4%; the unemployment rate in 2024 and 2025 will correspond to 4.0% and 4.1% respectively. The unemployment rate during the year is compared with the previous value. The forecast of 4.1% was revised slightly downward. In terms of inflation, the Federal Reserve predicts that it will correspond to 2.4% and 2.2% in 2024 and 2025 respectively. The forecast for 2024 is basically the same as the previous value.

　　Cheng Shi, chief economist of ICBC International, told China News Service: Faced with the current strong economic performance and a periodic rebound in inflation, Federal Reserve Chairman Powell said that the current economic data does not support the market's interest rate cuts for the time being, but this meeting will almost No hawkish signals were issued. Powell also deliberately downplayed the risk of inflation and believed that the strong labor market would not affect interest rate cuts.

　　Zhang Jingjing, chief macro analyst at the China Merchants Securities R&D Center, also believes that this interest rate meeting and Powell's speech are generally dovish, mentioning the possibility that inflation will drop to a level that can start interest rate cuts in the summer, and providing clues to slow down the balance sheet shrinkage.

　　Invesco Asia Pacific (excluding Japan) global market strategist Zhao Yaoting said: "Unsurprisingly, the market responded positively to this." Zhao Yaoting believes that the Federal Reserve's interest rate meeting and dot plot make the future clearer, because the Federal Reserve is still Interest rates are expected to be cut three times this year. As U.S. monetary policy eases, investors turn to riskier assets, and risky assets such as stocks and emerging markets may benefit from this.

When will the interest rate cut come? Pay attention to the prelude signals

　　Although the Fed did not give a specific time to cut interest rates, Powell once again stated that as long as the data supports it, it is appropriate to start cutting interest rates during the year. The dot plot also shows that there will be three interest rate cuts this year.

　　Cheng Shi predicts that when the fiscal effects of expansion substantively subside and the unemployment rate gradually rises to a range of 4.2%-4.5%, it will be a prelude to the release of interest rate cut signals.

　　Zhao Wei, chief economist of China International Finance Securities, believes that taking into account economic and political factors, if emergencies are not considered, the first interest rate cut in June or July may be the best choice for the Federal Reserve, and the Fed will cut interest rates two to three times throughout the year. However, this is not without conditions. Overly loose financial conditions will increase the uncertainty of subsequent inflation, thereby reducing the space for the Federal Reserve to cut interest rates. In actual operation, we need to pay attention to crude oil and super core service inflation in the first half of the year, and rent inflation in the second half of the year.

　　Li Chao, chief economist at Zheshang Securities, believes that this month's Federal Reserve interest rate meeting did not provide incremental information on the timing of interest rate cuts, but the reduction in the rate of balance sheet reduction may begin in May. The guidance for interest rate cut space in the dot plot in 2024 is still 75 basis points, but the neutral interest rate was slightly revised upward for the first time since 2019.

　　"In the context of a strong economic resilience, we believe that the risk of secondary inflation in the United States during the year cannot be ignored and may constrain the space for interest rate cuts during the year. Although the dot plot continues to give an interest rate cut expectation of 75BP during the year, as inflationary pressure increases, there may be room for future interest rate cuts. It will further narrow to 50 basis points or even less." Li Chao said.