In the first half of the year, there is a high probability that the Fed will end its rate hike cycle. According to the dot plot data at the Fed meeting in March, the Fed’s interest rate target for 2023 is 5.1%. In other words, even if the interest rate is raised by 25BP again in May, the Fed will adjust its policy interest rate range to 5%-5.25%, which has reached its policy target , marking the end of the Fed’s current rate hike cycle.
Market focus turns to when the Fed will cut interest rates. As the risks of the banking industry in developed countries are gradually exposed, the market’s expectations for the Fed’s rate hike in the first half of the year will gradually converge, and the game of when the Fed will cut interest rates will gradually become the main focus of the market. However, based on the calculation of the Clarida rule, the Fed’s interest rate cut within the year needs to satisfy inflation to fall to around 2.2%, which is a relatively harsh condition. Moreover, Federal Reserve Chairman Powell has a negative attitude towards cutting interest rates within the year. They believe that the probability of a rate cut during the year will decrease.
