Some economists believe that after Powell's press conference, the Fed's rate cutting cycle has ended, and according to the latest meeting minutes of the Fed, there will be no further rate cuts in 2025. However, the debate over whether the Federal Reserve will cut interest rates continues, with some economists believing that the rate cutting cycle may continue until 2026, while others believe that the rate cuts have completely ended

After the Federal Reserve meeting, Fed officials decided to maintain the benchmark interest rate between 4.25% and 4.5%, indicating that the economy may be entering a "policy neutral" phase. This decision was made against the backdrop of increasing global economic uncertainty, including its impact on domestic economic growth, inflation, and the job market in the United States. Although the Federal Reserve had anticipated two 25 basis point rate cuts in 2025 in December, according to Powell's speech at a press conference, this expectation may change.

Powell stated that the Federal Reserve is "not in a hurry" to cut interest rates and hopes to see further control over inflation or a slowdown in the labor market before considering another rate cut. This statement indicates that the Federal Reserve is currently cautious about the prospect of interest rate cuts, especially as inflation is still not fully under effective control. According to the policy guidelines of the Federal Reserve, future monetary policy will continue to rely on changes in economic data, particularly inflation and labor market dynamics.

Some economists believe that the interest rate cut cycle has ended because the two conditions proposed by Powell for interest rate cuts (further cooling of inflation and slowing of the labor market) are difficult to achieve in the short term. Steven Blitz, Chief US Economist at GlobalData TS Lombard, stated that the US economy will maintain a growth rate of 3% by 2025, which is significantly higher than the "trend" growth rate of 2%. He believes that this stronger demand may drive inflation back up, thereby enabling the Federal Reserve to maintain a high interest rate policy.

In addition, James Egelhof, Chief US Economist at BNP Paribas, also stated that inflation may rebound in 2025 due to increased tariffs, tightening immigration policies, and relatively loose fiscal policies. In addition, long-term inflation expectations also provide support for this. Egelhof firmly believes that the Federal Reserve will keep interest rates unchanged until mid-2026.

Aditya Bhave, an American economist at Bank of America's Global Research Department, believes that the Fed's interest rate cutting cycle has come to an end. He believes that Powell's speech indicates that it will be difficult for the Federal Reserve to carry out any interest rate cuts in 2025. Bawei said, "If the Federal Reserve doesn't cut interest rates in March, it means there won't be a rate cut in the first quarter, and the Fed usually doesn't take a slow pace of adjustment in a certain cycle

Matthew Luzzetti, Chief US Economist at Deutsche Bank, believes that the Federal Reserve is not far from a policy "neutral" state, with current interest rates roughly approaching 3.75%. He pointed out that it is necessary for the Federal Reserve to maintain interest rates slightly above neutral levels, so there is no possibility of further interest rate cuts this year.

However, trading activity in the derivatives market still indicates that some market participants expect interest rate cuts this year. The market generally expects that the Federal Reserve may cut interest rates by 25 basis points in June and autumn respectively. However, there are also voices suggesting that the Federal Reserve may take interest rate hikes in the future to address the resurgence of inflation.

Analyst interpretation:

The trading activities in the derivatives market demonstrate a high level of market attention to the future monetary policy of the Federal Reserve. Although the Federal Reserve chose to keep interest rates unchanged at its recent meeting, the market still expects the Fed to cut rates in the second half of 2025. The market's expectations for future interest rate hikes are relatively conservative, mainly reflected in the gradual postponement of the market's expectations for future interest rate hike cycles. Although some economists believe that the resurgence of inflation may prompt the Federal Reserve to raise interest rates again, overall market sentiment still tends to believe that the rate cutting cycle will not end immediately.

In addition, the pricing in the derivatives market indicates that the market remains cautious about the direction of the Federal Reserve's monetary policy in 2025. If inflation is not effectively contained, market expectations for interest rate hikes may advance to 2026, which could lead the Federal Reserve to reconsider its policy direction. Although the Federal Reserve stated in its statement that it is not in a hurry to cut interest rates, the market still expects a possible decrease in interest rates in the short term. As global economic uncertainty increases, the market is generally concerned about whether US economic growth can continue to remain strong to support inflation and the job market.

summary

Overall, despite the Federal Reserve's announcement to temporarily maintain interest rates unchanged, there is still significant uncertainty in the market's expectations for future monetary policy. Currently, the Federal Reserve's interest rate cutting cycle has not completely ended, and market expectations for future rate hikes are gradually being postponed. The market is paying attention to the dynamics of inflation and the labor market in the coming months to determine whether the Federal Reserve will take further monetary policy adjustments. Meanwhile, the policy direction of the Federal Reserve will be influenced by domestic economic performance and changes in the global economic situation.