On June 18, 2025, the central parity rate of the RMB against the US dollar was 7.1761, down 15 points. Strategists have noted that a few Federal Reserve officials may lower their expectations for interest rate cuts this year, which could be enough to reverse the current situation.
Matthew Ryan, head of market strategy at financial services firm Ebury, said that two interest rate cuts by the Federal Reserve in 2025 remain the basic prediction for most policymakers. Given the severe uncertainty of tariffs, they may not have enough confidence to substantially change their views. However, there is a risk that a few officials believe the extent of interest rate cuts this year is lower than previously expected, potentially leading to only a 25-basis-point cut in 2025.
The hawkish dot plot and Powell’s remarks emphasizing the lack of urgency in lowering interest rates may provide some room for the US dollar to strengthen in the second half of this week.
Huatai Securities maintains its benchmark judgment that the Federal Reserve is highly likely to cut interest rates twice in a preventive manner from September to December. Although geopolitical conflicts in the Middle East have pushed up oil prices, the current impact on the Federal Reserve is expected to be limited.
The Federal Reserve mainly focuses on the domestic job market and the trend of inflation: the job market is cooling down in an orderly manner, and the transmission of tariffs to inflation is not obvious for the time being. Therefore, it is expected that the Federal Reserve will keep interest rates unchanged at the June meeting, while lowering the growth forecast for 2025 and raising the inflation forecast.
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