Barclays Research Interpretation: Fed's Hawkish Signals, Rate Cut Expectations Slow

According to Barclays' latest research report, after cutting rates by 25 basis points in December, the Federal Reserve has released hawkish signals, suggesting that the pace of future rate cuts will slow. Combined with the latest dot plot, the Fed expects only two rate cuts in 2025 and will maintain two rate cuts in 2026, while inflation expectations have been significantly raised.

Core Interpretation

1️⃣ Slowing Rate Cut Pace

After this rate cut, market expectations for rapid easing have been dampened. The dot plot clearly indicates that the Fed remains cautious about the pace of rate cuts in 2025 and beyond, reflecting concerns about the complexity of the economic recovery.

2️⃣ Raised Inflation Expectations

The dot plot shows that the inflation target has been raised from the original 2%, indicating that the Fed's concerns about sticky inflation have intensified, while also suggesting that monetary policy needs to remain in a high-interest rate range for a longer time to combat inflation.

3️⃣ Market Impact of Hawkish Signals

Despite the initiation of rate cuts, the released hawkish signals may put pressure on risk assets. The improvement in market liquidity is limited, and the cryptocurrency market and high-risk assets face ongoing volatility.

Advice for Investors

• Cautious Allocation: A slow pace of rate cuts may extend the pressure of tightening policies on the market, making it suitable to focus on safe-haven assets and mainstream varieties with strong liquidity.

• Pay Attention to Inflation Dynamics: Adjustments in inflation expectations will directly affect future policy paths, requiring close monitoring of economic data and changes in market sentiment.

In summary, although the Fed has initiated rate cuts, the “slow rate cut” signal indicates that the market will still be under pressure in the short term, requiring cautious operations!