At the first monetary policy meeting in 2024, the Fed gave the market a blow in the face. In the early morning of February 1, Beijing time, the Federal Reserve announced at the monetary policy meeting that it would keep the current interest rate unchanged, in line with market expectations. While the Fed removed language from its monetary policy statement that it could raise rates further, markets did not wait for the Fed's signal to start cutting rates in March and were instead told:A rate cut in March is almost out of the question. Affected by this, the three major U.S. stock indexes closed down across the board, with the Dow Jones Industrial Average **082% to close at 3815030 points; S&P 500**161% to close at 484565 points; NASDAQ**223% to close at 1516401 o'clock. However, as the Federal Reserve shattered the market's hopes for a rate cut as early as March, the dollar index ended at 0 in New York26% to close at 10366。
The timing of the rate cut may be postponed until May
In its monetary policy statement, the Fed noted that the Committee decided to maintain the target range for the federal interest rate at 525% to 55%。In considering any adjustments to the target range for federal** interest rates, the Committee will carefully evaluate the subsequent data, the changing outlook, and the balance of risks. Overall, the Fed is in no hurry to start cutting interest rates, although it does not see the need for further rate hikes. Fed Chairman Jerome Powell said at a press conference after the meeting that a rate cut in March was not the basic attitude of Fed policymakers. "I don't think the committee will be able to meet in March with enough confidence to confirm that there will be a rate cut in March, or something like starting a rate cut cycle. Powell said. Powell's remarks shattered the market's illusions of a rate cut in March. Cheng Shi, chief economist of ICBC International, and Zhang Hongwei, senior economist of ICBC International, pointed out that when the fiscal effect of expansion substantially fades, inflation may further accelerate the fall, which will be the prelude to the Fed's interest rate cut. The Fed is expected to cut interest rates as early as May this year (April 30-May 1). We have raised the probability of a "soft landing" (i.e., no recession) for the US economy, corresponding to a rate cut of 75-125 basis points (3-5 cuts throughout the year).
It is too early to declare victory
Although the current inflation level in the United States is continuing to fall, it can be seen from the Fed's monetary policy statement that this is not enough for the Fed to declare that the fight against inflation has been successful. In the Fed's view, the U.S. economy is still some way from achieving a "soft landing". The statement noted that the economic outlook is uncertain and the Committee remains highly concerned about inflation risks. The Committee did not expect to lower the target range until there was more confidence in the sustained 2% inflation rate. Powell believes it is too early to declare a "soft landing" for the economy. While some progress has been made, the inflation target has not yet been met. Compared with the Fed's cautious approach, US Treasury Secretary Janet Yellen is more optimistic. In the fourth quarter of 2023, the United States' real gross domestic product (GDP) increased by 33%, achieving above-expected growth, and the U.S. economy will grow by 2 for the full year of 2023After 5%, Yellen said she did not see any signs in this report that threatened a "soft landing" for the U.S. economy. In the face of inflation and uncertainty about the economic outlook, the Fed is expected to remain cautious and wait for more data to come out before making a decision. Everybody is watching
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**: Financial Times client.Reporter: Liu Yanchunzi.
Editor: Han Shengjie.
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