CICC: The possibility of a soft landing of the US economy in the short term will further increase

CICC's research report pointed out that from the interest rate decision, the Fed has taken a larger interest rate cut of 50 basis points, which is more aggressive than we expected. The monetary policy statement pointed out that recent inflation data has given policymakers more confidence in achieving the 2% inflation target. The Fed's actions show that its reaction function has completely shifted from focusing on inflation to focusing on employment. We believe this is a signal that the Fed has a low tolerance for rising unemployment and officials do not want to take risks and destroy the bright prospects of a "soft landing". Based on Powell's statement, we believe that any unemployment rate exceeding 4.4% in the future may trigger more interest rate cuts. This also shows that the Fed will maintain a "dovish" stance until the data on the job market stabilizes. Looking forward, as the Fed has taken a larger interest rate cut, the possibility of a soft landing in the economy will increase further in the short term.