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终于有大行喊了:降息是2024年的事了,现在该讨论“美联储会因何而加息了”?

Finally, a major institution has stated: interest rate cuts will be a matter for 2024, and now the discussion should focus on "what might cause the Federal Reserve to raise interest rates?"

wallstreetcn ·  Jan 14 04:54

Bank of America believes that the latest non-farm payroll data indicates that the employment stabilization goal has been achieved, making further interest rate cuts by the Federal Reserve unnecessary. If the year-on-year growth rate of the core PCE price Index exceeds 3% and long-term inflation expectations become uncontrolled, it will lay the foundation for the Federal Reserve's next interest rate hike.

The non-farm data released last Friday was unexpectedly strong, reigniting inflation concerns. Has the prospect of interest rate cuts by the Federal Reserve been reversed?

Recently, multiple teams at Bank of America have released the latest Research Reports, looking ahead at the Federal Reserve's monetary policy path for this year.

The economic team led by Analyst Aditya Bhave at Bank of America believes that the non-farm data for December indicates the end of the Federal Reserve's rate-cutting cycle, considering that current inflation is still above target with upward risks, and the labor market is showing signs of stabilization, which may open the door for the Federal Reserve to shift towards rate hikes.

The banking team led by Analyst Ebrahim H. Poonawala at Bank of America expects the interest rate outlook to remain uncertain, with the yield on 10-year U.S. Treasury bonds possibly continuing to rise towards nearly 5%.

As the likelihood of Federal Reserve rate hikes increases, the interest rate team led by Analyst Mark Cabana at Bank of America has raised its expected values for U.S. Treasury yields across all maturities this year and warned of the recession and stagflation risks that a surge in long-term bond yields may bring in the short term.

The goal of stabilizing employment has temporarily been achieved, and focus shifts back to inflation.

The U.S. December non-farm report shows that 256,000 jobs were added in December, the largest increase in nine months, far exceeding the expected 165,000; the unemployment rate in December is 4.1%, lower than expected and November's 4.2%; although the year-on-year growth rate of average hourly wages has slowed, the overall growth rate remains relatively high.

The Bank of America economic team believes that this report "closes the door on rate cuts by the Federal Reserve" because the Fed's previous monetary policy focus has shifted from anti-inflation to stabilizing employment, and the latest non-farm data indicates that the job stability goal has been achieved, meaning there is no need for further rate cuts.

At the same time, as the current inflation level remains above the 2% target, the focus on the interest rate path will shift back to inflation. Therefore, the bank speculates that the risk of the Fed's next move is more likely to be an increase rather than a decrease.

The team also warned that 2025 will continue to be a year of uneven growth, implying that policy uncertainty and disagreements will intensify.

What conditions are necessary for the Federal Reserve to raise interest rates?

The Bank of America economic team stated that the current federal funds rate remains restrictive, and for discussions about interest rate hikes to be put on the agenda, the 'threshold will be very high', possibly requiring core PCE Index year-on-year growth to exceed 3% plus long-term inflation expectations to be out of control.

Latest data shows that the USA's November PCE Index rose 2.4% year-on-year, the highest level since July; the core PCE Index grew 2.8% year-on-year, on par with the previous value.

The bank's interest rate team also released a report stating that as the possibility of the Federal Reserve raising interest rates increases and the imbalance in the US Treasury market's supply and demand worsens, US Treasury yields still have upward potential.

In the report, the team raised the forecast range for USA Treasury yields by 50 basis points, with the expected value for the 10-year Treasury yield adjusted to 4.75%.

The Bank of America rate team expects that if the 10-year Treasury yield rapidly skyrockets in a short time (for example, due to rising inflation or an expanding fiscal deficit causing market turmoil), it could impact the USA economy and stock market, increasing the likelihood of recession or stagflation.

The bank's bank team also added that while a rising level of Treasury yields generally leads to a gradual deterioration in Crediting quality, if the job market remains resilient and USA GDP growth stays within the 2-3% Range, widespread deterioration in Crediting is not expected.

The team expects that the interest rate outlook remains uncertain and anticipates that the Federal Funds Rate will remain stable or slightly decline next, while the 10-year Treasury yield may approach 5%.

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