Unanimous Decision Expected to Keep Rates Steady at February Monetary Policy Committee Meeting
NH Investment & Securities forecasted that the U.S. Federal Reserve (Fed) will cut interest rates by 100 basis points (1bp = 0.01 percentage points) from June through the end of the year.
On the 19th, Seungwon Kang, a researcher at NH Investment & Securities, stated, "Considering the strong seasonality at the beginning of the year, it is premature to regard the January Consumer Price Index (CPI) as a turning point for inflation rebound."
The U.S. January Consumer Price Index (CPI) rose 3.1% year-on-year. This significantly exceeded expectations (2.9%), raising concerns among some about additional rate hikes. Month-on-month, it also increased by 0.3%, rebounding compared to the 0.2% rise in December of last year.
Researcher Kang pointed out, "The implication of the January CPI is that expectations for an early rate cut (in March) can themselves act as upward pressure on actual inflation."
However, Kang dismissed concerns about rate hikes as unfounded. He analyzed, "If the hikes were insufficient, the yield curve would have shown bear steepening (rise in long-term rates), but this time it exhibited bear flattening (rise in short-term rates), reflecting the market’s judgment that more time is needed."
Furthermore, he diagnosed, "January retail sales also fell significantly short of market expectations, so there is no clear evidence that tightening is insufficient."
Kang stated, "For the time being, the Fed will tend to make decisions based more on data," adding, "Unless there are further hikes, the 10-year yield of 4.3% confirmed during this adjustment phase will serve as a meaningful resistance level." He also recommended, "In the current range-bound market, it is advisable to approach interest rate rises from a buying perspective."
Meanwhile, the Bank of Korea’s Monetary Policy Committee (MPC), meeting on the 22nd, is expected to unanimously keep rates unchanged. Kang pointed out, "The Fed’s conditions for rate cuts depend heavily on domestic factors such as employment and inflation." He emphasized that Korea’s conditions for rate cuts require all domestic and external factors, including △ signals of Fed cuts △ inflation stabilization △ stabilization of household debt.
Among these, Kang highlighted that the Fed’s cut signals are the most important. He said, "After the January MPC, the signals for achieving these three conditions are not yet clear, and the Fed’s cut signals have weakened," adding, "There is no reason for the February MPC to change." He further forecasted, "The MPC will repeat the January stance with a unanimous hold."
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