BOC Hong Kong: The Federal Reserve should gradually reduce interest rates appropriately to prevent inflation from rising sharply again.

The Federal Reserve lowered the federal funds rate to a range of 4.75% to 5%, with a cut of 50 basis points. Wang Zhaozong, General Manager of BOC Hong Kong Investment Management, stated that the U.S. economy is still resilient, and the increase in unemployment rate is mainly due to the increase in immigrants adding to the labor supply, rather than significant layoffs by U.S. companies. The Federal Reserve is appropriate in gradually reducing interest rates to prevent a rapid rise in inflation. Wang Zhaozong said that the rate cut this time is roughly in line with the predictions of the interest rate futures market, and believes it will not cause significant market volatility. The current downward trend of inflation still aligns with the Federal Reserve's expectations, and believes the focus of the "dual mandate" of the Federal Reserve will gradually shift from inflation to employment, actively avoiding a "hard landing." According to the dot plot forecast, the median rate at the end of this year is 4.375%, which means the Federal Reserve will cut interest rates by another 50 basis points within the year. Federal Reserve Chairman Powell stated that inflation is heading towards the target of 2%, and the Federal Reserve is concerned about the downside risks in the labor market. The pace of future rate cuts will depend on future economic data, and the 50 basis point cut should not be seen as a new rhythm.