CICC: The possibility of a soft landing of the US economy in the short term will further increase
According to a research report by China International Capital Corporation (CICC), the Federal Reserve has taken a more aggressive approach by implementing a larger 50-basis-point rate cut, which is more aggressive than our expectations. The monetary policy statement indicates that recent inflation data has given policymakers more confidence in achieving the 2% inflation target. The Fed's actions suggest that its reaction function has shifted entirely from focusing on inflation to focusing on employment. We believe this is a signal that the Fed has a very low tolerance for rising unemployment, and officials do not want to risk disrupting the prospect of a "soft landing." Based on Powell's remarks, we believe that any unemployment rate above 4.4% could trigger further rate cuts. This also suggests that the Fed will maintain a "dovish" stance until the labor market data stabilizes. Looking ahead, as the Fed has taken a more aggressive rate cut, the possibility of a soft economic landing in the short term will further increase.
