Huachuang Securities: The threshold for raising interest rates is still relatively high, and the Federal Reserve may keep rates unchanged this year.

Huachuang Securities released a research report stating that the market is highly concerned about the direction of future monetary policy after the new Federal Reserve Chairman took office. Focusing on US monetary policy, the implied probability of rate futures, represented by the FedWatch tool, needs to be approached with caution, as such indicators fluctuate greatly and cannot be directly equated with the actual policy orientation of the Federal Reserve. The issue of income inequality among US residents is very prominent, with the labor market showing a "short-term hot, long-term not hot" characteristic. Inflation is currently at a peak stage, and medium to long-term expectations have not yet anchored. Taking into account these three aspects, it is not so easy for the Federal Reserve to raise interest rates. The bank still holds a wait-and-see attitude towards the Federal Reserve's rate hikes this year, as the difficulty of implementing rate hikes is high, and they are more inclined towards the Federal Reserve maintaining interest rates unchanged this year. Huachuang Securities' main points are as follows: 1. Income Inequality: With income inequality worsening, it is naturally easier to lower interest rates than to raise them. 2. Labor Market: Short-term hot, long-term not hot. 3. Inflation: The probability of peaking in the second quarter, with medium to long-term expectations not anchored. 4. In summary, Huachuang Securities believes that the Federal Reserve's rate hikes are not easy, considering income inequality, labor market structure, and inflation trends. They believe that a policy combination of being verbally hawkish while being dovish in action is currently the most reasonable for the Federal Reserve to manage expectations and avoid substantial tightening policies that could have difficult-to-hedge impacts on the economy. Overall, they view the market's brewing expectations of rate hikes as more of expectation management, and they still maintain a wait-and-see attitude towards the Federal Reserve's rate hikes this year, leaning towards the Federal Reserve maintaining interest rates unchanged as the difficulty of implementing rate hikes remains high.