"US Fed Halts QT... Market Interest Rates Expected to Stay in a Narrow Range Around 4%"

Following the United States Federal Reserve (Fed)'s announcement to halt quantitative tightening (QT), securities firms are forecasting that future market interest rates will be constrained on both the upper and lower ends, fluctuating within a narrow range around 4%. Analysts suggest that for investors, it would be appropriate to buy when the yield on the 10-year U.S. Treasury nears its previous high of 4.2%.

On October 30, Ahn Yeha, a researcher at Kiwoom Securities, analyzed the results of the October Federal Open Market Committee (FOMC) meeting, which decided on a 0.25 percentage point cut to the benchmark interest rate and a reduction in the balance sheet starting this December, in her bond market report.

Jerome Powell, Chair of the United States Federal Reserve (Fed), is speaking at a press conference after the Federal Open Market Committee (FOMC) meeting on the 29th (local time). Photo by AP Yonhap News

Ahn, who described this FOMC as somewhat "hawkish" (favoring monetary tightening), stated, "We have confirmed that there are diverging opinions within the Fed regarding interest rate policy," but maintained her forecast for an additional rate cut in December. She explained, "Although the federal government shutdown is restricting the ability to monitor key indicators, it is acting as a downside factor for the economy. Therefore, it remains necessary to maintain an accommodative policy environment to counteract the slowdown in employment observed by the Fed."

She added, "Considering Chair Jerome Powell's cautious stance, the timing of further rate cuts after December is likely to be around the end of the first half of next year, coinciding with the appointment of a new Fed chair following Powell's term. As expectations for a rate cut build, market interest rates are expected to continue a gradual downward trend during the first half of the year."

However, market interest rates are expected to remain trapped within a narrow range through the end of this year. Ahn explained, "As uncertainty surrounding the path of rate cuts in December has increased, the lower bound will be constrained, while expectations for improved supply-demand conditions due to the end of QT will limit the upper bound."

She continued, "In the short term, the risk of higher rates has increased as expectations for a rate cut have diminished. However, the overall trajectory of a rate cut in December and another by the end of the first half of next year remains intact. Therefore, it would be appropriate to buy if the 10-year U.S. Treasury yield approaches its previous high of 4.2%."

This content was produced with the assistance of AI translation services.