On June 19, 2023, the Federal Reserve maintained the benchmark interest rate at 4.25%-4.50%, marking the fourth consecutive meeting where it held steady, in line with market expectations.

Reason Analysis

- Employment Stability: Non-farm employment in May exceeded expectations, with the unemployment rate stable at 4.2%, alleviating recession concerns.

- High Inflation: The core PCE inflation rate in May was 4.7%, above the Federal Reserve's 2% target, indicating persistent inflation.

- Slowing Growth: The Federal Reserve projects that economic growth will slow in 2025 due to impacts on consumer and investment spending.

Market Impact

- Stable Capital Flows: There are no significant changes in global capital flow patterns, with no noticeable risks of inflows or outflows in emerging markets.

- Positive for US Stocks: The market has already priced in the no-rate-hike expectation, easing short-term uncertainty, leading to a rise in US stocks.

- Limited Impact on A-shares: There is short-term pressure on interest rate-sensitive sectors of A-shares, but A-shares are primarily driven by domestic factors.

Future Outlook

It is predicted that the first rate cut may occur on September 18, 2025, with two rate cuts expected within the year, bringing the end-of-year rate to 3.75%-4.00%. However, the actual trajectory will depend on US economic data, inflation trends, and global economic and geopolitical factors.