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Xinhua News Agency, Washington, Dec. 22 According to the data released by the US Department of Commerce on the 22nd, the US personal consumption expenditures (PCE) price index in November increased by 2.6% year-on-year, excluding food and energy prices after the core PCE price index increased by 3.2% year-on-year, the increase is narrower than the previous month. The PCE's decline suggests that US inflation is "cooling". The market generally believes that the Federal Reserve may have ended this rate hike cycle and will cut interest rates next year, while it remains to be seen whether the US economy can "soft land".

The Fed held its last monetary policy meeting of the year in the middle of this month and left the target range for the federal funds rate unchanged at 5.25% to 5.5%. It is the third time in a row that the Fed has left that range unchanged since September.

In determining 'any' further tightening of monetary policy, the Fed will take into account the cumulative degree of tightening of monetary policy, the degree of lag in the effects of monetary policy on economic activity and inflation, and economic and financial developments, the Fed said in its post-meeting statement.

Fed Chairman Powell said at the post-meeting press conference that the use of the word "any" indicates that the Fed believes that the current interest rate may have been at or near the peak level of this rate hike cycle, but does not rule out the possibility of further hikes. He also said that while the Fed has made progress in reducing inflation, there is still a long way to go and the central bank is carefully assessing whether more action is needed.

At the same time, the Fed expects U.S. economic growth to slow next year. The Federal Reserve recently released the latest economic outlook, raising the US economic growth forecast for this year by 0.5 percentage points to 2.6% from the September forecast, while lowering the economic growth forecast for 2024 by 0.1 percentage points to 1.4%. Tightening financial and credit conditions for households and businesses are likely to weigh on economic activity, but the extent of the impact remains uncertain.

In response to the question of whether the US economy can achieve a "soft landing", the Wall Street Journal recently reported that six months ago, the survey of economists generally believe that the US economy will enter a recession in the next 12 months, and in the October survey, the average forecast of economists is not a recession. Us inflation has fallen better than expected and there is no sign of a recession, but consumers have started to cut back on spending.

In the recent statements of the Federal Reserve, the expectation of interest rate cuts has received much attention. The "dot plot" of the Fed's latest economic outlook forecasts shows that 17 of 19 Fed officials expect the policy rate to be lower by the end of 2024 than it is today, with most expecting rates to be either 50 or 75 basis points lower. That means the Fed will cut rates two or three times next year, based on 25 basis points each.

Although the interest rate cut is expected to cause a greater response among investors, as Powell said, the "dot plot" does not represent the actual monetary policy, and there is considerable uncertainty in the Fed's forecast for the future trend of interest rates.

'After nearly two years of rapid monetary tightening, a shift to lower rates next year seems the most likely outcome,' Wells Fargo Securities economists said in an analysis, forecasting the first rate cut at the Fed's June meeting. According to the report, the US economy is likely to achieve a "soft landing" in 2024, but even if a contraction is avoided, actual economic growth is likely to be below trend in the coming quarters due to the restrictive stance of monetary policy.

Desmond Lachman, an economist at the American Enterprise Institute, told Xinhua that the US economy as a whole has performed well this year, with inflation falling and the economy continuing to recover. However, due to the impact of monetary policy, such as a long lag time and variable factors, it is still unclear whether the Fed can ensure a "soft landing" of the economy.