Zhongjin: How many more times can the Federal Reserve lower interest rates?

CICC's research report states that at the September FOMC meeting that ended in the early hours of today Beijing time, the Federal Reserve cut the benchmark interest rate by 25 basis points to 4-4.25%. This is the first rate cut in 9 months since December last year. Although the Fed has been more optimistic than the market about whether a rate cut would be initiated, and the past two months have confirmed this, the size of this rate cut is not aggressive. Apart from concerns about unresolved inflation issues, the small rate cut can address most of the current growth pressures in the US, meaning that there is no need for a significant amount of rate cuts. The report points out that the Fed's decision was in line with expectations, with no surprises or deviations in the future rate cut path. The market and various assets have already priced in the rate cut expectations, so in the short term, the "dovish trading" that has continued for nearly a month may temporarily pause (rate cuts, weak dollar, rising gold, growth and emerging markets leading). The reactions of the US stock market and major assets last night were in line with this. The key points from CICC's report are as follows: - The Fed cut the benchmark interest rate by 25 basis points to 4-4.25% at the September FOMC meeting. This is the first rate cut in 9 months and was widely expected by the market. - The Fed's decision to cut rates was described as a "risk management" move. Chairman Powell characterized the rate cut as a response to weakening job market conditions and upward pressure on inflation. - The Fed's "dot plot" indicates two more rate cuts this year, but there is significant internal disagreement among Fed officials. - The report suggests that the Fed's rate cut was moderate and balanced risks. The Fed may continue to cut rates but is cautious about the pace and extent of future rate cuts. - The report also highlights the potential impact on different asset classes, including US Treasuries, gold, the US dollar, and US stocks. The report concludes that the Fed's rate cut was in line with expectations and does not signal a significant shift in monetary policy. The market will now be watching economic data releases, such as nonfarm payrolls and inflation figures, to gauge the probability of further rate cuts in the coming months. Additionally, the report suggests that market participants should monitor the performance of different asset classes and adjust their investment strategies accordingly.