At the "Global Markets: Trends and Risks" forum, Liu Yuanchun, president of Shanghai University of Finance and Economics, said that the Fed may cut interest rates in 2024, but the financial sector will still be impacted.
In his view, the high interest rate policy adopted in the past to continuously fight inflation will inevitably produce a series of sequelae. These sequelae will not only lead to an increase in investment costs and a decrease in investment efficiency in related production areas, but more importantly, the high interest rate policy will cause a continuous asset-liability contraction effect on the entire financial sector, which will have a series of shocks to the real economy.
He said that although it is still uncertain whether the current interest rate hike cycle is over, the stickiness of inflation in Europe and the United States still exists. In the case of the United States, the latest CPI has fallen by about 3% to 31%, however, core inflation remains around 4%.
Therefore, he judged that the Fed may cut interest rates in 2024. However, for some time, in order to combat the recurrence of inflation and seek to bring inflation down to 2%, it will still be necessary to maintain a policy of high interest rates, which means that the financial sector will still have to bear the shock of the current high interest rates.