This document is based solely on the Federal Reserve's June FOMC meeting dot plot, U.S. inflation/employment data, and mainstream investment bank views for macroeconomic scenario modeling. It does not constitute any investment advice. The Fed's policy is entirely "data-dependent," and inflation, employment, and geopolitical conflicts can change the interest rate path at any time.

I. Current Baseline Status (June 2026)



1. Benchmark Rate: 3.50%-3.75%, unchanged for four consecutive FOMC meetings

2. Core Contradiction: Inflation stickiness has far exceeded expectations, while the economy and labor market remain relatively resilient. The Fed's policy focus has shifted from "rate cuts" to "preventing inflation from rebounding."

3. Key Data (May)

- CPI YoY 4.2%, a new high since 2023; core PCE full-year forecast raised to 3.3%, far above the 2% target

- Unemployment rate 4.3%, labor market remains tight, no clear signs of recession

4. Core Conclusions from the June Dot Plot (18 FOMC member projections)

- 2026 year-end median rate 3.8%, implying one rate hike (25bp) for the year

- 9 officials support a rate hike this year (3 for +25bp, 5 for +50bp, 1 for +75bp), only 1 sees a rate cut

- 2027 median rate 3.6%, 2028 3.4%, the rate-cutting cycle is significantly delayed



II. Three Scenario Projections (H2 2026 – Full Year 2028)



Scenario 1: Base Neutral Scenario (Probability 60%, aligned with the Fed's dot plot median expectations)



1. H2 2026: One rate hike, no rate cuts for the full year



- July FOMC: Maintain 3.50%-3.75% unchanged, emit a clear hawkish signal that "if data does not improve, a rate hike in September"

- September FOMC: Hike 25bp, rate rises to 3.75%-4.00%

Trigger conditions: Core CPI and PCE rebound for two consecutive months, service inflation continues to rise, nonfarm payrolls remain strong

- Nov/Dec: No further rate adjustment for the year, year-end terminal rate 3.75%-4.00%



2. Full Year 2027: Maintain high rates throughout the year, one small rate cut at year-end



Maintain 3.75%-4.00% range for the full year, only a 25bp cut in December, year-end rate 3.50%-3.75%

Logic: Inflation slowly declines to around 2.5%, but still far from the 2% target, the Fed will not ease quickly



3. Full Year 2028: Officially begin the rate-cutting cycle, two rate cuts for the year (total 50bp)



25bp cuts in March and June each, rate falls to 3.00%-3.25%, gradually converging toward the 3.1% long-run neutral rate



Scenario 2: Hawkish Extreme Scenario (Probability 25%, mainstream forecast from BofA and Deutsche Bank)



Core premise: Energy, tariffs, and service inflation remain persistently stubborn, AI investment drives excess demand, inflation stays above 3.2% for the full year



1. 2026: 2-3 rate hikes

- Deutsche Bank: 25bp hikes in September and December, year-end rate 4.00%-4.25% (cumulative +50bp)

- BofA (most aggressive): Three hikes in Sep/Oct/Dec, cumulative +75bp, rate 4.25%-4.50%

2. Full Year 2027: No rate cuts, maintain high rates to suppress inflation

3. Rate cuts only begin in the first half of 2028, only 50bp total for the year, very slow easing pace



Scenario 3: Dovish Moderate Scenario (Probability 15%, views from UBS and Citi)



Core premise: Oil prices drop significantly, rent inflation continues to decline, employment weakens, initial jobless claims trend upward, inflation falls quickly



1. Full Year 2026: No rate hikes, maintain 3.50%-3.75% unchanged

- Citi (most dovish): Two rate cuts in October and December, cumulative 50bp for the year, year-end rate 3.00%-3.25%

2. H1 2027: Accelerate rate cuts, 2-3 cuts for the year, rates quickly fall back to the neutral range



III. Core Indicators for Determining Rate Hikes or Cuts (Key Inflection Signals)



Signals Triggering Further Rate Hikes (Conditions for September hike confirmation)



1. Core PCE ≥ 3.2% for two consecutive months, CPI YoY persistently above 4%

2. Monthly nonfarm payrolls above 200k, unemployment rate below 4.3%

3. Middle East geopolitical conflict pushes oil prices higher, imported inflation rebounds

4. Inflation in goods and services spreads simultaneously, not a one-time disturbance



Preconditions for Turning to Rate Cuts (difficult to ease without all)



1. Core PCE steadily falls below 2.7% with a three-month downward trend

2. Employment clearly weakens: unemployment rate rises above 4.6%, nonfarm payrolls drop below 100k

3. U.S. consumption and manufacturing PMI continue to contract, hard recession risk increases

4. Inflationary pressures from oil prices and import tariffs fully subside



IV. Concise Comparison Table of Full Rate Paths (2026-2028)



Time Period Base Neutral (60%) Hawkish Extreme (25%) Dovish Moderate (15%)
H2 2026 25bp hike in Sept, year-end 3.75%-4.00% 50bp hikes in Sept/Dec, year-end 4.00%-4.25% No change all year / 50bp cut at year-end
Full Year 2027 25bp cut at year-end, median 3.6% No cuts all year, maintain 4.00%+ 2-3 cuts, median 3.25%
Full Year 2028 2 cuts total 50bp, median 3.4% 2 cuts total 50bp, easing only in H2 3+ cuts, toward 3.0%



V. Market and Asset Impact Projections



1. USD: If the rate hike path materializes, the dollar index strengthens in the medium to long term; if dovish rate cuts are realized, the dollar weakens persistently

2. U.S. Treasuries: Rising rate hike expectations push up short- and long-end Treasury yields; rising rate cut expectations push bond prices up and yields down

3. Equities: High rates continue to pressure growth stocks and high-valuation AI sectors; the start of a rate-cutting cycle benefits technology and growth sectors

4. Commodities: Rate hikes are negative for gold and oil; rising rate cut expectations are positive for precious metals



VI. Key Risk Variables (Could Completely Rewrite Rate Forecasts)



1. Geopolitical Conflict: Middle East oil supply crisis, escalation of global trade tariffs, directly push up inflation and force rate hikes

2. U.S. Election Fiscal Policy: New rounds of subsidies and infrastructure stimulus could boost aggregate demand and push up inflation

3. Labor Market Shock: Large-scale corporate layoffs trigger a recession, forcing the Fed to cut rates quickly

4. Financial Risk Outbreak: Deep correction in U.S. stocks, commercial real estate crash, the Fed pauses tightening or even restarts easing