CICC: The Federal Reserve is still expected to cut interest rates twice in 2026, with the first rate cut possibly delayed until the second quarter.

The research report of China International Capital Corporation indicates that the Federal Reserve maintained interest rates unchanged at the January meeting, in line with market expectations. Director Waller cast a dissenting vote, possibly related to his desire to be nominated as the next Chair of the Federal Reserve. The monetary policy statement stated that "the unemployment rate has stabilized," and Powell stated that monetary policy is "in the right place," indicating a higher threshold for further rate cuts in the short term. In addition, Powell did not provide much guidance on other issues unrelated to interest rate setting. We believe that the Federal Reserve is still expected to cut rates twice in 2026, but the first rate cut may be postponed to the second quarter. The core issue of the US economy is not inadequate growth, but rather income inequality and the affordability pressure on ordinary households. These structural issues cannot be solved by monetary policy alone and may instead drive the government to take more non-market interventionist policies to address voters' concerns.