CITIC Securities: balance sheet shrinkage slows down as scheduled, the Federal Reserve still needs to wait to cut interest rates

On May 5th, the CITIC Securities Research Report pointed out that the Federal Reserve's May 2024 interest rate meeting will maintain the target range of the federal funds rate at 5.25% -5.5%. The statement of the meeting changed a lot, announcing that it will start to slow down the balance sheet in June. Powell's speech was generally neutral and dovish, pointing out that the Fed's next move is unlikely to be a rate hike. CITIC Securities believes that before the US unemployment rate rises to more than 4%, the Fed's policy focus is still on inflation. It is expected that there is still the possibility of interest rate cuts this year. The first interest rate cut still needs to be "while looking at" inflation data, 3 trillion the size of the dollar's reserves or the threshold for this round of balance sheet reduction to stop. In the short term, it is expected that the US dollar index and US bond interest rates will remain volatile, and US stocks may continue to operate weakly.