BANK OF E ASIA (00023): Expect the Federal Reserve to cut interest rates by 0.25% each quarter in the first half of the year.

The Chief Economist of Bank of East Asia (00023), Cai Yongxiong, has stated that he expects US inflation to moderate slightly, but will still remain above policy targets for a period of time. He predicts that the Federal Reserve will reduce interest rates by a quarter point each quarter in the first half of 2025, with the pace of rate cuts potentially slowing down afterwards. To avoid excessive market liquidity tightening, he anticipates adjustments to the balance sheet around the middle of 2025. Overall, he forecasts that US monetary policy will continue to move from tightening towards neutrality. He also mentioned that in 2025, the European Central Bank is expected to lower interest rates by at least a quarter point each quarter, with a total reduction of 1 point for the year. Cai stated that the US economy outperformed expectations in 2024, with projected annual growth of 2.5%, higher than its trend rate. The incoming US President Trump is set to take office in January 2025, with the Republican Party gaining control of both houses of Congress. Cai expects that most of Trump's policy proposals will be passed, focusing on strengthening internal US interests. This may provide stimulus to economic growth, but could also increase inflationary pressure and impact the future pace of Federal Reserve rate cuts. Looking ahead to 2025, the US economy is expected to grow slightly above trend, reaching 1.9%.