The market continues to expect when the FED will reduce interest rates

9 Feb 2024

After the FED's recent move, experts all share the same opinion that it is too early for the Fed to contemplate changing monetary policy, but interest rate cuts could begin in the second half of the year.

1 Stocks were negatively affectedates unchanged. Fed Chairman Jerome Powell emphasized that, at the upcoming meeting in March, the central bank may not be ready to reduce interest rates because there are still concerns about the current inflation situation

.He pointed out that, before making a decision on interest rate policy, the Fed needs more time to evaluate and determine its level of comfort with the current inflation situation. This move shows the Fed's careful consideration before important decisions on monetary policy, when the economy faces many challenges. Information from CNBC said that the US stock market fell to its lowest level of the session, when the head of the Fed dashed traders' hopes that the central bank would cut interest rates sooner than before. when an economic recession occurs. The Dow Jones Industrial Average lost 300 points at one point.
Chief economist of Comerica Bank - Bill Adams commented that the Fed suffered heavy losses at the end of 2021 and 2022 when they thought high inflation was only temporary, then was surprised when it became higher and persistent. tougher than expected. Therefore, they want to avoid making the same mistake twice. “The Fed will wait to trigger interest rate cuts until it sees inflation actually approaching the 2% mark.” Commenting on the Fed's move, Mr. Phan Le Thanh Long, a financial expert, said that the Fed's reduction of interest rates in 2024 is in the plan, but a rapid reduction cannot happen yet.

In addition, there are also mixed views about the possibility that the US will be at risk of recession in the second half of 2024. However, in my opinion, the US will not have a recession as long as the economy is still strong enough as it is now. now, with a high possibility of a "soft landing". Corresponding to that, interest rates cannot decrease quickly. Regarding the impact on Vietnam, the Vietnamese stock market has been quite quiet recently, the biggest example is that the VN-Index has not changed much. In particular, transaction volume and transaction value are not very promising. Although the profits of large enterprises have gradually appeared, we have to wait and see when the reports are actually released," Mr. Long said.

2 Thị trường tiếp tục kỳ vọng

Following the Fed's move on Feb. 1, Hong Kong banks said they would keep their benchmark interest rates unchanged in line with the city's monetary regulator, providing comfort to banks. businesses and mortgage borrowers as the economy struggles to emerge from a persistent recession.
In particular, HSBC, Hang Seng Bank and Bank of China (Hong Kong) kept the basic lending interest rate at 5.875% and deposit interest rate at 0.875% per year. Standard Chartered keeps the interest rate for priority customers at 6.125% and the deposit interest rate at 0.875%. These decisions all comply with the regulations of the Hong Kong Monetary Authority (HKMA), keeping the base interest rate of this area at 5.75%. The HKMA also warned that the timing of the Fed's interest rate cut and the subsequent interest rate path remain uncertain, and the high interest rate environment may last for a while. The public should carefully assess and manage the risks involved when making their real estate purchase, mortgage or loan decisions.
It can be seen that US inflation decreased to 3.4% in December, from a peak of 9.1% in mid-2023. The pace of consumer price growth is still faster than the Fed's request to keep it at 2%, but has slowed down enough to make the market happy. Franck Dixmier, global investment director at Allianz Global Investor, predicted that interest rate cuts could begin in the second half of the year. “We believe it is too early for the Fed to contemplate changing its monetary policy. Despite the tightening of monetary policy over the past two years, growth has remained surprisingly resilient. The soft or no landing scenario to avoid a recession seems to be becoming a reality," Dixmier said.

Sharing the same view, ACY Securities currency analyst Luca Santos said that this change in expectations has reshaped the market landscape, with interest rate cuts from the Fed now expected to take place from May, based on future interest rate prices. The next two meetings of the Fed will take place on March 30 and May 1, the market continues to expect that this may be the time when the Fed makes its loosening policy decision, when inflation increases. continues to decline and job growth slows.

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