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.

According to the minutes of the Federal Open Market Committee (FOMC) meeting from October 31 to November 1 released by the Federal Reserve, participants discussed the development of financial markets, expectations for monetary policy, and the development of the currency market. The minutes pointed out that participants believed that in order to achieve maximum employment and maintain a 2% inflation rate in the long term, they agreed to maintain the target range for the federal funds rate at 5.25% to 5.5%. All FOMC members agreed to "act cautiously" on interest rate issues and unanimously believed that it was appropriate to maintain a restrictive monetary policy for a period of time until inflation clearly declines towards the target. If the information received suggests that progress towards the inflation target is insufficient, it would be appropriate to further tighten monetary policy. Nick Timiraos, a journalist known as the "Fed's mouthpiece" and the "new Fed news agency," commented that when the recent decision to pause interest rate hikes was made, Fed officials were reluctant to conclude that they had completed interest rate hikes. However, the minutes suggest that officials may be willing to keep rates unchanged at least for this year. (Wall Street News)

Probability of the Federal Reserve maintaining interest rates in the range of 5.25% to 5.50% in December is 99.8%, and the probability of a 25 basis point rate cut is 0.2%. The probability of maintaining interest rates unchanged until February next year is 97.8%, the probability of a cumulative rate cut of 25 basis points is 0.2%, and the probability of a cumulative rate hike of 25 basis points is 2%. The probability of a cumulative rate cut of 25 basis points until March next year is 29.4%, the probability of maintaining interest rates unchanged is 69.1%, and the probability of a cumulative rate hike of 25 basis points is 1.4%.

On November 17th, the October US CPI was lower than market expectations. Specifically, the CPI was 0% on a month-over-month basis, lower than the market expectation of 0.1%; the core CPI was 0.2% on a month-over-month basis, lower than the market expectation of 0.3%; the CPI rose 3.2% on a year-over-year basis, lower than the market expectation of 3.3%; and the core CPI rose 4.0% on a year-over-year basis, lower than the market expectation of 4.1%.

On November 15th, based on CME's "Fed Watch": the probability of the Fed maintaining interest rates in the range of 5.25%-5.50% in December is 94.5%, and the probability of raising interest rates by 25 basis points to the range of 5.50%-5.75% is 5.5%.

According to CME's "Fed Watch": The probability of the Fed maintaining interest rates in the range of 5.25%-5.50% in December is 90.9%, and the probability of raising interest rates by 25 basis points to the range of 5.50%-5.75% is 9.1%. The probability of maintaining interest rates unchanged until January next year is 77.7%, the probability of cumulative interest rate hikes of 25 basis points is 21%, and the probability of cumulative interest rate hikes of 50 basis points is 1.3%. 

Goldman Sachs has stated that the difficult phase of the United States' fight against inflation seems to be over. Once the core PCE falls below 2.5%, it is expected that the Federal Reserve will cut interest rates from the fourth quarter of 2024 to the second quarter of 2026, with a reduction of 25 basis points per quarter. Two key risks still exist: soaring oil prices and the possibility of something breaking in the new interest rate environment. The risks are real but controllable, partly because the Federal Reserve can freely cut interest rates next year and has enough room to do so.

Fed's Daly said that it is uncertain whether the Fed has completed the interest rate hike process; the risk of excessive tightening or insufficient tightening is roughly balanced; data will need to be monitored to determine whether inflation is returning to the path of 2%; it is not yet clear whether interest rates are sufficiently restrictive; it is premature to declare victory over inflation now, but the policy status is good; there should be no surprise about the volatility in the bond market.

On November 9th, the Federal Reserve's Harker stated that the next Fed rate decision "may be based on data." The Fed will maintain a higher level of interest rates for a longer period of time, with no signs of a rate cut. 

The Wall Street Journal reported that Fed's Kashkari does not believe the interest rate hike cycle has ended.