State-Backed Chinese Company Announces FED’s Forecasts for the Future Interest Cycle: When is the Cut?

A recent study by China International Capital Corporation (CICC) emphasized that the current cycle of the US Federal Reserve (FED) does not fundamentally support early interest rate cuts.

The research suggests that U.S. economic growth is less likely to face a deep and sudden downturn, and that an early downturn in financial conditions could reignite growing demand for real estate.

But the Fed’s policy change could potentially accelerate the timing of its first interest rate cut, which was initially expected in the second half of 2024, researchers say. The FED may choose a “precautionary” strategy, in line with its approach in 1995 and 2019. This may include a pause to observe the effects of the first rate cut rather than implementing successive rate cuts.

In its interest rate decision announced last Wednesday, the FED preferred to keep interest rates constant and predicted 3 separate interest rate cuts of 75 basis points in its 2024 forecasts. However, the market is focusing on further interest rate cuts.

The next meeting of the FED will be held on January 30-31, 2024.

*This is not investment advice.