CITIC Securities: The Fed's 50bps rate cut is a preventive rate cut

CITIC Securities Research Report pointed out that the Federal Reserve cut interest rates by 50bp at the September 2024 interest rate meeting, exceeding some market expectations. The statement of the interest rate meeting has changed significantly compared to the previous one, showing the Fed's confidence in cooling inflation and its support for the job market. The dot plot shows that the central target interest rate this year is 4.4%, lower than 5.1% at the June 2024 meeting, and the target interest rate level for next year has been lowered. Powell said that there is no preset path for interest rate cuts, and decisions are still made meeting by meeting. He continues to emphasize policy flexibility. At the same time, he is optimistic about the economic situation and the job market, and still depicts a "soft landing" picture. We believe that the Fed's 50bp interest rate cut this time is a preventive interest rate cut that is launched in advance, intended to maintain the current state of economic growth and the job market, while maintaining subsequent policy flexibility. It is expected that there will be two more 25bp interest rate cuts this year. After the expected rate cut in overnight trading is realized, the market is expected to return to "soft landing" trading in the short term. The downward space of US bond interest rates is limited, and US stocks may continue to be highly volatile. Sectors such as biotechnology and real estate tend to perform well in "soft landing" rate cut trading. (Jinshi)