CICC: Fed Expected to Keep Rates Unchanged in First Half, Rate Cut Restart Likely Delayed to Second Half

Why does CICC believe the U.S. economy is entering a stagflation-like phase?

On March 19, CICC noted that the Federal Reserve kept interest rates unchanged at the March meeting, in line with market expectations. The dot plot and economic forecasts showed upward revisions in inflation expectations and a narrowing of rate cut room, indicating a cautious overall policy stance. Although Powell believes that oil price shocks are highly uncertain and the economy remains resilient, CICC considers the actual situation more complex. Tariffs and immigration policies have already constrained supply, and combined with oil price shocks, the U.S. economy is entering a stagflation-like phase. Meanwhile, risks in private credit are emerging, and financial conditions may tighten spontaneously. Against this backdrop, the Fed is likely to remain on hold in the short term due to sticky inflation; in the medium term, as demand weakens or financial risks increase, there may be pressure to cut rates passively. It is expected that the Fed will keep rates steady in the first half of the year, with rate cuts postponed to the second half. However, if rate cuts are a passive response to worsening economic or financial conditions, it will also be difficult to boost market risk appetite.