Does the U.S. Have No Choice but to Cut Rates? [Weekend Money]

"Oil Prices Expected to Fall Further After U.S.-Iran Peace Agreement"
"Boosting Effects of Tariffs and Energy Prices Likely to Disappear"

Although the number of members at the U.S. Federal Reserve (Fed) supporting an interest rate hike within the year has increased significantly, there is analysis suggesting that it will be difficult to actually raise the benchmark rate.

AP Yonhap News

On June 20, Samsung Securities stated in its report "Implications of the June FOMC" that while a rate cut may be delayed, the threshold for a rate hike remains high.

On June 17 (local time), the Fed, under the leadership of new Chairman Kevin Warsh, held its first Federal Open Market Committee (FOMC) meeting and decided to keep the benchmark interest rate unchanged at 3.50–3.75%. During this FOMC, the number of members supporting a rate hike within the year increased to nine, equaling those supporting a hold or cut. This result reflects concerns about inflation.

Although the risk of a rate hike has increased compared to before, Samsung Securities still expects the Fed to cut the benchmark rate two more times in the future. This is because, following the U.S.-Iran peace agreement, international oil prices have been falling rapidly. The price of West Texas Intermediate (WTI) crude oil, which was around $100 per barrel last month, has dropped to an average of $83 this month.

The disappearance of the boosting effects from tariffs and energy prices is also expected to influence a rate cut. With these effects fading, it is expected that the year-on-year increase in the U.S. Consumer Price Index (CPI) will drop sharply by 0.8 to 1.0 percentage points between December and next March. Even if the Fed raises the benchmark rate once, it may have to lower it again within a few months.

Jinwook Heo, a researcher at Samsung Securities, said, "Those who suggested a rate hike within the year are believed to be hawkish chairs, and it seems that a majority of members with voting rights on this year's projections, including Fed leadership, still support holding rates steady."

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