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CICC: The less you expect the Fed to cut interest rates, the more likely it is to lead to a rate cut

On May 21, CICC's research report pointed out that since the beginning of this year, asset outlets have frequently switched, and the main line behind it is precisely the economic fundamentals and policy expectations driven by the looseness of financial conditions. With the loosening of US financial conditions since May, we suggest that subsequent economic data may strengthen again. If it strengthens too much, it may even affect the interest rate cut window in the third quarter, similar to the "reprint" at the beginning of the year, thereby limiting the space and sustainability of the market and asset risk preference at this position. In other words, the less you expect a rate cut, the more likely it is to lead to a rate cut; the more you expect a rate cut, the more likely it will be postponed. Therefore, even if you continue to participate in rate cut transactions in the current environment, you should also pay attention to the sustainability of the rebound and the reflexivity of the loosening of financial conditions. As for the Federal Reserve, it may learn the lesson of its too rapid shift at the end of last year, which led to higher inflation at the beginning of the year. It will maintain its current tight stance and wait for more data to be released (for example, inflation continues to fall next month) before easing up.