AI TRENDS | CICC Says Fed Held Rates Steady in June and Set Up Five Working Groups

CICC said the U.S. Federal Reserve kept interest rates unchanged at its June meeting, in line with market expectations.

According to Jin10, CICC said the biggest change from the meeting was a reform effort aimed at reshaping the Fed’s policy framework. It said the monetary policy statement was significantly simplified and forward guidance was removed, which it interpreted as an attempt to reduce the Fed’s direct influence on markets.

CICC said the Fed planned to establish five working groups focused on communications, the balance sheet, data, productivity and employment, and the inflation framework. It said this structure would lay institutional groundwork for a more conservative and market-oriented policy approach associated with Kevin Warsh.

CICC said the balance-sheet assessment was listed second among the working groups, which it took as a sign that balance-sheet reduction remained a core policy inclination.

On the policy outlook for the rest of the year, CICC said Warsh did not provide clear guidance, while the dot plot turned more hawkish. It said the mean projection pointed to one rate hike within the year, reflecting a backdrop of stabilizing employment and elevated inflation, with inflation-fighting becoming the main focus.

CICC said it maintained its view that the Fed would neither raise nor cut rates within the year, but it flagged rising risks of rate hikes next year. It added that if the U.S. economy continued to strengthen and entered a broad recovery driven by AI-related capital expenditure, further monetary tightening could not be ruled out.