"US Interest Rate Cut Forecast Revised from 3 to 2 Times This Year"

Shinyoung Securities Lowers Forecast for Fed Rate Cuts to Two This Year
Bank of Korea Expected to Maintain Two Rate Cuts, with First Possible in February

Shinyoung Securities revised its forecast for the number of Federal Reserve (Fed) interest rate cuts from three to two within this year. The Bank of Korea is expected to cut rates again in February after holding them steady in January, maintaining its forecast of two rate cuts this year.

On the 14th, Shinyoung Securities researcher Jo Yong-gu stated in a report, "Overall, signals of employment slowdown are retreating, so indicators supporting the Fed’s rate cuts are limited for the time being," adding, "Accordingly, we expect only two rate cuts this year (June and December) and an additional two cuts next year."

He explained, "This is because inflation is expected to be on a rebound path until January, and the slowdown in the labor market is also delayed."

He recommended that although U.S. Treasury yields currently offer price merits for new entries, it is necessary to respond by raising levels for the time being. He said, "Nevertheless, confirmation of policies since Trump’s inauguration is still needed, and from March, factors such as re-entry into disinflation and a slowdown in immigrant employment, though slow, will support a gradual insurance-type rate cut cycle," adding, "On an annual basis, we expect a stepwise downward trend in levels, confirming indicators rather than excessive front-loading as seen last year."

He predicted that the upcoming first Monetary Policy Committee meeting of the year on the 16th will hold the base rate steady without a cut. Researcher Jo said, "We currently judge that it is a time to consider the foreign exchange market more, and considering changes over the past week, it has become difficult to decide on a rate cut at the January Monetary Policy Committee," noting, "The Bank of Korea has been relatively passive in intervening in the foreign exchange market compared to expectations, but it will be difficult to tolerate the 1,500 won level, and concerns about expanding foreign exchange risks related to financial institutions are also being raised."

He also expected that two dissenting opinions for rate cuts will emerge within the committee while the base rate is held steady. He anticipated that the number of members considering rate cuts within the next three months could increase to four or five.

He said, "From the beginning of the year, the Bank of Korea has declared a ‘flexible’ rate cut policy, and the fact that member Lee Soo-hyung mentioned in an interview with foreign media that the Bank’s policy priorities are price stability, financial stability, and economic growth rate in that order can be seen as a fundamental message but also likely served as a signal."