CICC: The likelihood of a soft landing for the U.S. economy in the short term will further increase

ChainCatcher message, CICC research report points out that, from the perspective of the interest rate decision, the Federal Reserve has taken a more aggressive cut of 50 basis points than we expected. The monetary policy statement indicates that recent inflation data has given decision-makers more confidence in achieving the 2% inflation target. The Fed's actions suggest that its reaction function has completely shifted from focusing on inflation to focusing on employment.

We see this as a signal that the Fed has a low tolerance for rising unemployment rates, and officials do not want to risk undermining the favorable prospect of a "soft landing." Based on Powell's statements, we believe that any unemployment rate exceeding 4.4% in the future could trigger further rate cuts. This also indicates that the Fed will maintain a "dovish" stance until employment market data stabilizes. Looking ahead, the likelihood of a soft landing for the economy in the short term will further increase due to the Fed's more significant rate cuts.