The Federal Reserve's last interest rate meeting in 2024 has come to an end, with the target range for the federal funds rate remaining unchanged at 5.25% to 5.5%, a decision that aligns with market expectations. This marks the third consecutive time the Fed has announced that it will keep the federal funds rate unchanged, sparking widespread market attention regarding the future direction of the Fed's policies. Is a rate cut a likely event? What impact will it have on us?

From the signals released at this meeting and the statements made by Federal Reserve Chairman Powell, it seems certain that the Fed will no longer raise interest rates. Powell indicated that, due to gradually easing inflationary pressures, the Fed will maintain interest rates and observe economic conditions to determine whether further policy adjustments are needed in the future.

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This statement provides a clear signal to the market that the Fed will not raise interest rates again in the short term.

At the same time, the market widely expects the Fed to initiate rate cuts next year. Against the backdrop of increasing risks of economic recession and gradually easing inflationary pressures, rate cuts can stimulate economic growth and consumption.

Market analysts believe that the Fed may start cutting rates in the first half of next year to promote economic growth and prevent further economic slowdown.

Chairman Powell stated in public that the current policy interest rate is already at or near the peak of this tightening cycle, which undoubtedly sends a strong signal to the market.

After years of raising interest rates, the Fed is finally saying goodbye to this tightening policy and turning to a more accommodative monetary policy.

Over the past few years, the Fed has been gradually increasing the policy interest rate to curb high inflation and maintain price stability.

This means that the Fed will no longer continue to raise interest rates but may instead turn to a more accommodative monetary policy to promote economic growth and stabilize prices.However, although the Federal Reserve's interest rate hike cycle is about to end, this does not mean that the economy will immediately undergo a transformation. On the contrary, due to the gradual emergence of the effects of interest rate hikes in the past few years, economic growth may slow down. Although the unemployment rate remains low, employment growth has already shown signs of slowing down. Despite the fact that the Federal Reserve's tightening policy may be nearing its end, the economy may still face some challenges. In this situation, the Federal Reserve needs to take appropriate measures to balance economic growth and price stability. On the one hand, they can stimulate economic growth by lowering interest rates and increasing the money supply; on the other hand, they can control price increases by adjusting monetary policy. Unless special events occur, the Federal Reserve may have completed interest rate hikes, and the current focus will be on when to start lowering interest rates. This decision may be influenced by fiscal policy, political factors in the U.S. elections, and economic data. Many times, the Federal Reserve does not necessarily wait for an economic recession to choose to lower interest rates. As long as inflation remains within a certain reasonable range, such as 2%-3%, the Federal Reserve may consider lowering interest rates in advance. The U.S. government has implemented a series of fiscal stimulus measures to support economic recovery. However, as time goes on, the effects of these stimulus measures gradually weaken, and fiscal policy also needs to gradually exit.This could lead to a slowdown in economic growth, and even the risk of recession, thereby increasing the likelihood of the Federal Reserve lowering interest rates.

The political pressure of the U.S. elections is also one of the important factors affecting the Federal Reserve's decision-making.

During the election period, politicians often take some measures to win the support of voters, one of which is to lower interest rates. Therefore, if the Federal Reserve does not take interest rate reduction measures during the election period, it may be affected by political pressure.

In addition, if the election results lead to a change of government, the new government may adopt different economic policies, which may also affect the Federal Reserve's decision-making.

In summary, changes in U.S. fiscal policy and the pressure of the elections will accelerate the pace of the Federal Reserve's interest rate cuts.

According to the calculation of the Federal Reserve's previous interest rate hike cycles, it usually takes about 8.5 months from the last interest rate hike to the first interest rate cut. According to this rule, the interest rate cut may occur in April next year.

Federal Reserve Chairman Powell did not explicitly state when the interest rate cut would occur, but mentioned that the discussion on the interest rate cut decision has been launched in the meeting.

He emphasized that if a recession occurs, it will severely affect the interest rate cut decision, reflecting that Powell's formulation of the interest rate cut decision will mainly depend on a series of U.S. economic data.

Powell's statement shows that he is concerned about the trend of economic data, especially the possible economic recession.

He seems to be emphasizing that only when the economic data deteriorates will the Federal Reserve consider lowering interest rates at the right time.This strategy is a consistent approach to monetary policy operations by the Federal Reserve, which is to stimulate economic growth through interest rate cuts when signs of economic downturn appear.

Powell's attitude also reflects the Federal Reserve's concerns about the complexity and uncertainty of the current U.S. economy. Although the U.S. economic growth has maintained relative stability over the past period, fluctuations in the global economy and the implementation of domestic economic policies could have a significant impact on the economy.

Therefore, the Federal Reserve needs to be flexible in dealing with various possible economic changes, which requires a comprehensive, data-based decision-making strategy. However, Powell did not provide a clear timetable for the specific timing of the interest rate cut decision. This may be because the Federal Reserve still needs to consider many factors, including the trend of the global economy, the domestic political environment, and other potential uncertainties.

In addition, Powell may also want to avoid prematurely revealing policy intentions to prevent excessive expectations and reactions in the market. After the announcement of the Federal Reserve's interest rate meeting, fluctuations in the foreign exchange market have attracted widespread attention. Among them, the exchange rate of the renminbi against the U.S. dollar showed a clear upward trend.

As of 17:00 on the 15th, the spot exchange rate of the offshore renminbi against the U.S. dollar had increased by about 900 basis points, setting a new high since June this year.The United States' high-interest-rate policy may continue until the middle of next year, while China is likely to maintain a relatively loose monetary policy before the middle of next year, with the possibility of further rate cuts.

Therefore, the divergence in monetary policies between China and the United States will still exist in the first half of next year. If the Federal Reserve begins to cut interest rates in the third quarter of next year, it will have an impact on U.S. Treasury yields and the U.S. dollar index, which may lead to a weakening of the U.S. dollar index.

Currently, there are signs of cooling in consumption, investment, manufacturing, and non-manufacturing activities in the U.S. economy.

In addition, the interest rate on U.S. Treasury bonds has reached its peak, and in the future, during the interest rate reduction cycle, the 10-year U.S. Treasury bond yield will continue to weaken, and it is highly likely to break below 4%. The appreciation of the renminbi has also become inevitable.

At that time, although China's interest rates are still at a low level, if China no longer cuts interest rates and the United States begins to cut interest rates, this is also a kind of divergence from another perspective.

Although the interest rates in the United States are still higher than those in China at this time, the pressure of capital outflow will be somewhat reduced under the condition of narrowing interest rate differentials. Fei Zhu predicts that the renminbi exchange rate may be around 6.5 at the end of next year. With the strengthening of interest rate reduction expectations, both the U.S. stock market and the renminbi have already reacted in advance. Now, it's just a matter of time for the A-share market. Fei Zhu always believes that the renminbi will appreciate in the long term, and the A-share market will rise next year. Do you think so?