CME's "Fed Watch": The probability of the Fed maintaining interest rates in May is 98.3%, and the probability of a cumulative rate cut of 25 basis points is 1.7%. The probability of the Fed maintaining interest rates in June is 72.3%, the probability of a cumulative rate cut of 25 basis points is 27.3%, and the probability of a cumulative rate cut of 50 basis points is 0.5%.

Custodia Bank lost its lawsuit against the Federal Reserve for refusing its application for a master account. The judge ruled that the Federal Reserve has the right to decide whether to grant a master account. Judge Scott Skavdahl of Wyoming stated that federal law does not require the central bank to allow every qualified deposit institution to enter its master account system, and the evidence provided does not indicate that the Federal Reserve Board influenced a regional branch's decision to reject their account application.

On January 21st, Morgan Stanley economists stated that the Federal Reserve will announce a plan to slow down its balance sheet reduction in May and begin the process in June. Seth Carpenter and others at the bank wrote that they expect the Federal Reserve to "elaborately" discuss the balance sheet issue at the next three FOMC meetings, announce the scale and scope of the slowdown in May, and begin the process in June. Morgan Stanley previously predicted that the Federal Reserve would start slowing down its balance sheet reduction in September of last year. The bank still maintains its expectation that the balance sheet reduction will end in February 2025. It is expected that the overnight reverse repurchase tool usage of the Federal Reserve will drop to $250 billion by May or June. 

On January 20th, the President of the Federal Reserve Bank of San Francisco, Daly, stated that it is premature to declare victory over inflation and we have not yet lowered inflation to 2%. He also believes that it is too early to consider cutting interest rates.

Barclays economists predict that the Fed will start cutting interest rates earlier than previously thought, based on this week's inflation data. They predict that the start time will be in March instead of their previous prediction of June. "Given the recent progress on inflation, we believe that the FOMC will be comfortable cutting interest rates without needing to see a significant weakening in the economy or labor market," Marc Giannoni and Jonathan Millar wrote in a research report on Friday. As before, they expect the Fed to cut rates by 25 basis points at every other meeting. This prediction is based on the premise that the economy is gradually slowing down and that the unemployment rate is slightly higher than the Fed's long-term estimate (3.5%-4.3% as of December).

On January 7th, Fed's Logan warned that the Fed may need to resume raising short-term policy rates to prevent a recent decline in long-term bond yields from reigniting inflation. "If we do not maintain sufficiently tight financial conditions, we face the risk of inflation rebounding and reversing the progress we have made," Logan said. "Restrictive financial conditions play an important role in keeping demand and supply in line and maintaining stable inflation expectations," she said, noting that the inflation rate is already close to the Fed's target of 2% and that the labor market, although still tight, is rebalancing. "If we do not maintain sufficiently strict financial conditions, we cannot expect to maintain price stability."

Federal Reserve Chairman Powell stated that the Fed is committed to maintaining a tight policy until inflation reaches the 2% target. It is too early to speculate when the policy will be relaxed. If the timing is right, the Fed is prepared to further tighten monetary policy.

On November 30th, two Federal Reserve officials provided reasons on Wednesday to continue maintaining interest rates unchanged, while another warned that the risk of persistently high inflation should keep the option of further rate hikes on the table.

According to Federal Reserve Board member Bullard, who is generally inclined to the hawkish side, he said on Tuesday that he is becoming more confident that the interest rate currently set by the Federal Reserve will prove sufficient to push inflation down to the target of 2%, while acknowledging that if the work of lowering inflation continues to make progress, it may be possible to cut interest rates in a few months.

Commonwealth Bank of Australia predicts that the Federal Reserve will begin cutting interest rates in May of next year and will lower the benchmark interest rate by 150 basis points by the end of next year to cope with a mild recession in the United States. The bank's currency strategist, Carol Kong, said that we expect the FOMC's interest rate reduction cycle to be more aggressive than the market expects. Currently, the market prices in a reduction of about 90 basis points by the Federal Reserve next year. Kong said that, for now, strong US economic data may reinforce the current soft landing argument and cause the US dollar to continue to rise.