CITIC Securities: The Fed's 50bps rate cut is a preventive rate cut
Odaily Planet Daily Report: According to a research report by CITIC Securities, the Federal Reserve will cut interest rates by 50bp at its September 2024 policy meeting, exceeding market expectations. The policy statement has changed significantly compared to the previous one, indicating the Fed's confidence in cooling inflation and supporting the job market. The dot plot this time shows that the target interest rate midpoint for this year is 4.4%, lower than the 5.1% in the June 2024 meeting, and the target rate for next year has also been lowered. Powell stated that there is no preset path for rate cuts, and decisions will be made on a meeting-by-meeting basis, continuing to emphasize policy flexibility, while being relatively optimistic about the economic situation and the job market, still painting a "soft landing" scenario. We believe the Fed's 50bp rate cut this time is a preemptive and preventive rate cut, aimed at maintaining the current economic growth and job market conditions, while preserving flexibility for future policies. We expect two more 25bp rate cuts within the year. After the expected overnight trading rate cut is realized, the market may return to the "soft landing" trade in the short term, with limited downside for US Treasury yields, and US stocks may still remain in a high-volatility state, with biotech and real estate sectors often performing better in the "soft landing" rate cut trade. (Jin Shi)
