CITIC Securities: The Federal Reserve adjusts its policy stance and still needs to wait for interest rate cuts

CITIC Securities research report stated that the Federal Reserve’s interest rate meeting in January 2024 will maintain the target range of the federal funds rate at 5.25%-5.5%. There have been major changes in the statement at this meeting, indicating that the Fed's policy stance may have been adjusted. Powell's speech was generally hawkish and did not believe that a rate cut in March was the baseline scenario. CITIC Securities maintains its previous judgment that the current round of interest rate hikes by the Federal Reserve has ended, and the first interest rate cut may be around the middle of the year. The balance sheet shrinkage may begin to slow down after March, and the balance sheet shrinkage may end from the middle of the year to the third quarter. However, attention needs to be paid to unexpected surprises in the labor market. A weakening may cause disruptions to the policy process. The U.S. dollar index and U.S. bond interest rates are expected to remain volatile. In the short term, the negative factors for U.S. bonds have basically come to fruition, while U.S. stocks need to pay attention to recent financial reports.