Morgan Asset Management: The Federal Reserve remains on hold, and a series of positive policies outside the United States are benefiting international stocks
Morgan Asset Management pointed out that the Federal Reserve's decision to keep interest rates unchanged shows sensitivity to the slowdown in economic growth. Although inflation forecasts have been raised, economic growth expectations have been lowered, indicating that the Federal Reserve still maintains a loose policy stance. The market reacted positively, with stock prices rising, bond yields increasing, and international stocks benefiting from positive policies outside the United States. The overall outlook remains uncertain, emphasizing the importance of diversified investments
According to the Zhitong Finance APP, the Federal Open Market Committee (FOMC) of the Federal Reserve, as expected by the market, maintained the target range for the federal funds rate at 4.25% to 4.5%, keeping it unchanged for two consecutive meetings. Kerry Craig, a global market strategist at Morgan Asset Management, stated that the message from this meeting is that progress has been delayed. The Federal Reserve pointed out an unexpected shift in commodity inflation and expects inflation to rise in 2025. However, based on the average views of FOMC members, they still expect a further easing of policy by 50 basis points this year.
He noted that it is worth mentioning that the official statement removed the wording about a roughly balanced approach to inflation and employment targets, indicating that FOMC members are now more sensitive to the risks of slowing growth than to the risks of rising inflation. Changes in the Economic Forecast Report confirm this view, as the Federal Reserve raised its inflation forecast (core PCE growth up 0.3 percentage points to 2.7%), but the downward adjustment was less than that of the 2025 economic growth forecast (down 0.4 percentage points to 1.7%). He expressed understanding of the challenges the Federal Reserve faces in accurately predicting economic trends amid the numerous policy noises in Washington.
The Federal Reserve's easing bias still exists, and it will again rely on overall data to assess the differences between pessimistic forward-looking consumer and business surveys and still strong backward-looking economic hard data (such as a robust labor market). The Federal Reserve itself also acknowledges that it is not in a hurry to ease policy, which may mean that there will only be one more rate cut in the first half of 2025.
Kerry Craig believes that the Federal Reserve does not have all the answers but still faces many questions about how to interpret the shifts in the U.S. economy and the impact of policies. Currently, the market seems convinced that the Federal Reserve is ready to take action when necessary, as the stock market rose after the Fed's statement, bond yields increased, and the curve steepened. This positive sentiment is likely to spread to the Asian markets this morning. Overall, the outlook remains uncertain and reinforces the benefits of diversifying investments across a range of assets and regions. In terms of stocks, a series of positive policy developments outside the U.S. are benefiting international equities. Meanwhile, in the fixed income market, the weakening economic growth outlook suggests that U.S. Treasury yields may still exhibit a downward rather than upward asymmetric characteristic