BOCHK: The Fed should gradually reduce interest rates 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 rate cut of 50 basis points. Wang Zhaozong, General Manager of Bank of China Hong Kong Investment Management, stated that the U.S. economy is still resilient, and the rise in unemployment is mainly due to the increase in labor supply from immigrants, rather than significant layoffs by U.S. companies. The Federal Reserve is appropriate in gradually reducing interest rates to prevent a sharp rise in inflation. Wang Zhaozong mentioned that this rate cut 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 in inflation still aligns with the Federal Reserve's expectations, and it is believed that the focus of the Federal Reserve's "dual mandate" will gradually shift from inflation to employment, actively avoiding a "hard landing." According to the dot plot forecast, the median interest rate at the end of this year is 4.375%, indicating another 50 basis points rate cut by the Federal Reserve within the year. Federal Reserve Chairman Powell stated that inflation is moving towards the target of 2%, and the Federal Reserve is monitoring the downside risks in the labor market. The pace of future rate cuts will depend on future economic data, and the 50 basis point rate cut should not be seen as a new rhythm