Download App

[PIMCO: Positive Inflation Report, Fed May Cut Rates Twice This Year] (1) Tiffany Wilding, an economist at Pacific Investment Management Company (PIMCO), said the latest US inflation report was “quite encouraging,” with two positive changes providing support for the Fed to cut rates this year. PIMCO believes that two more rate cuts this year are reasonable. (2) Structural pressures on inflation. Wilding said the first positive development was a significant slowdown in the rise of US house prices. The continuous rise in house prices since the pandemic has been curbed. According to Freddie Mac data, the US 30-year mortgage rate has stabilized below 6.3%. Although homebuying sentiment has cooled, the rate of increase in house prices has fallen to a near two-year low, and the market has returned to rationality, which has further alleviated (3) The second positive signal comes from the gradual fading of tariff-related effects. Wilding said that the inflationary pressure from tariffs was mainly concentrated in the commodity sector and the transmission process was relatively slow. However, this pressure is now continuously weakening. Federal Reserve Chairman Jerome Powell has previously stated that most of the impact of tariffs has been transmitted to the economy and is expected to subside by mid-2026, which is highly consistent with the trend observed by PIMCO. As the impact of tariffs on inflation gradually diminishes, inflationary pressures will become more manageable. (4) Whiting emphasized that the continued progress of the above two positive trends will significantly reduce the Fed's policy concerns, making it more willing to initiate interest rate cuts to support the smooth operation of the economy. Considering the current pace of economic recovery and the situation of inflation control, PIMCO believes that the Fed's decision to implement two more interest rate cuts this year is a reasonable decision in line with the current economic fundamentals.