The Federal Reserve is expected to cut interest rates twice this year.

Recently, several institutions and Federal Reserve officials have signaled that the Fed is expected to implement two interest rate cuts in 2025, attracting widespread market attention. Federal Reserve official Bostic explicitly stated that despite the uncertainty, the forecast of two interest rate cuts within the year is maintained. This view coincides with institutions such as Barclays and Janus Henderson, the latter further pointing out that the interest rate cuts may be implemented in June and September, each at 25 basis points, totaling 50 basis points.

The core factor supporting this expectation is the continued cooling of US inflation data. In February, the year-on-year increase in CPI fell to 2.8%, and core CPI also hit a near four-year low, indicating that inflationary pressures are gradually easing. In addition, the slowdown in economic growth (such as GDP in the first quarter falling to 1%) and cooling labor market have prompted the Fed to shift its policy focus towards stimulating growth.

The market generally believes that if the first rate cut in June is launched as scheduled, the improvement in liquidity in the second half of the year will boost the performance of risk assets, and emerging markets such as A-shares may usher in structural opportunities. However, the policy path is still affected by fluctuations in employment and inflation, and we need to beware of the short-term volatility brought about by expectation adjustments.

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