CICC: The Federal Reserve may only cut interest rates once this year, likely in the fourth quarter

ChainCatcher message, CICC's research report believes that the actual GDP annualized growth rate for the first quarter of 2024 in the United States is 1.6%, which is lower than the market expectation of 2.4% and also below last year's fourth quarter rate of 3.4%. The institution believes that this GDP report is not as weak as it appears, because consumer spending and fixed asset investment, which represent domestic demand, remain robust, and the low GDP is dragged down by high import growth. However, the increase in imports indicates that demand is not weak, and domestic supply cannot meet the demand, thus requiring overseas supply to satisfy it, which aligns with the characteristic of "supply not meeting demand" in the U.S. economy since the pandemic.

Compared to GDP data, more critically, the core PCE inflation in the first quarter rebounded more than expected, which poses the biggest risk to the market. The elasticity of inflation will raise the threshold for the Federal Reserve to cut interest rates, allowing the dollar interest rates to remain high for a longer period. The institution reiterates its previous judgment that the Federal Reserve may only cut interest rates once this year, likely in the fourth quarter.