CITIC Securities Co., Ltd.: The Federal Reserve's 50bps rate cut this time is a preemptive rate cut to act in advance

CITIC Securities research report pointed out that the Federal Reserve is expected to cut interest rates by 50 basis points at the September 2024 meeting, exceeding market expectations. The statement of the meeting showed significant changes compared to the previous one, indicating the Federal Reserve's confidence in cooling inflation and support for the job market. The dot plot for this meeting shows a central target rate of 4.4% for this year, lower than the 5.1% in the June 2024 meeting, and also lowered the rate target level for next year. Powell stated that the rate cut is not on a preset path, decisions will still be made meeting by meeting, emphasizing policy flexibility. He remains optimistic about the economic situation and job market, still painting a picture of a "soft landing". We believe that the 50 basis points rate cut by the Federal Reserve this time is a preemptive easing to maintain the current economic growth and job market conditions, while keeping policy flexibility for the future. We expect two more 25 basis points rate cuts later this year. After the overnight trading rate cut expectations are met, the market is expected to return to a "soft landing" trading in the short term, with limited downside for US bond yields. US stocks may continue to exhibit high volatility, with sectors like biotechnology and real estate often performing well in "soft landing" rate cut trading scenarios