As expected by the market, the US Federal Reserve kept the federal fund rate target range unchanged at 5.25 to 5.5 basis points. Zhang Shiqi, head of the Wealth Strategy and Analysis Division of the Personal Digital Financial Products Department of Bank of China Hong Kong, believes that the interest rate decision reflects the Federal Reserve's cautious attitude towards inflation downturn and requires time to observe before starting the rate cut cycle.

Zhang Shiqi believes that two changes in the interest rate dot plot are worth noting. First, the median interest rate at the end of this year was raised from 4.6% forecast in March to 5.1%. Calculated at 0.25% per rate cut, it means that there may only be one rate cut this year. Second, compared with the distribution of committee members' views on interest rates in March, the overall committee members have also raised their predictions for the median rate at the end of 2024, with more consistent views, while there are greater differences in views on interest rates next year. After the interest rate meeting, interest rate futures contracts show that the market expects the probability of a 25 basis point rate cut in September to be less than 65%, while the possibility of a rate cut in November has increased to 100%. It can be seen that the market has certain expectations for the Federal Reserve to maintain the current interest rate level for a period of time.

Zhang Shiqi believes that the Federal Reserve currently needs to balance the impact of the interest rate level on economic growth and avoid a rebound in inflation after the rate cut begins. If the Federal Reserve starts cutting interest rates too early, the financing cost will decrease. Under the support of the economy, it may cause companies to increase investment. There is no denying that it will make inflation more difficult to return to the target level or even rebound. Even if it starts to cut interest rates, it may have to turn around and raise interest rates, which will affect the confidence of investors. Therefore, the Federal Reserve needs time to observe and take a biased hawkish stance to manage market expectations in advance. With moderate economic growth and expected inflation downturn, Zhang Shiqi expects the long-term performance of the stock market to be favorable. However, US stocks are already at historic highs, and investors need to guard against the volatility brought by different data that affects the expected rate cut.