Group 1 - The Federal Reserve announced a 25 basis point cut in the federal funds rate target range to 4.00% to 4.25%, marking the first rate cut of 2025 and following three cuts in 2024 [1] - The Fed's forecast indicates a potential additional 50 basis points cut by the end of the year, with further cuts of 25 basis points each year for the next two years [1] - Concerns about the Fed's independence have been raised, particularly in light of the current economic conditions and potential labor market deterioration [1] Group 2 - The resumption of the Fed's rate-cutting cycle is expected to improve global liquidity conditions, although the impact will depend on the pace of rate cuts and the relative policies of other major central banks [3] - The narrowing of the interest rate differential between China and the U.S. may alleviate depreciation pressure on the RMB, but the domestic economic fundamentals will remain crucial for foreign capital flows [3] - The dollar index is anticipated to face downward pressure due to the Fed's rate cuts and a cooling U.S. economy, potentially leading to passive appreciation of the RMB [3]

Core Viewpoint - HSBC Global Investment Research maintains its previous forecast that the Federal Reserve will only lower interest rates twice by 25 basis points each before the end of 2026, bringing the target rate range down to 3.5%-3.75% [1] Summary by Relevant Sections - **Federal Reserve Rate Decision** - On September 18, the Federal Reserve lowered the federal funds rate target range by 25 basis points to 4.00%-4.25%, aligning with market expectations [1] - **Future Rate Projections** - HSBC projects two additional rate cuts of 25 basis points each in December of this year and March of next year, leading to a target range of 3.5%-3.75% by the end of 2026 [1] - **Economic Factors Influencing Rates** - Factors such as expansionary fiscal policy, inflation persistence due to tariff effects, and pressure from a depreciating dollar may keep the core PCE inflation relatively high in the U.S. through 2026 [1] - **Labor Market Considerations** - If the labor market worsens, particularly with an increase in unemployment claims, there is a possibility that the Federal Reserve may consider another rate cut of 25 basis points in October or a larger cut next year [1]