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

I. Current Baseline (June 2026)
1. Benchmark Rate: 3.50%-3.75%, unchanged for four consecutive FOMC meetings
2. Core Contradiction: Inflation stickiness significantly exceeds expectations; the economy and labor market remain resilient; the Fed's policy focus has shifted completely from "rate cuts" to "preventing inflation rebound"
3. Key Data (May)
- CPI YoY 4.2%, highest since 2023; Core PCE full-year forecast raised to 3.3%, well above the 2% target
- Unemployment rate 4.3%; labor market remains tight with no clear recession signals
4. Key Conclusions from June Dot Plot (18 FOMC participants' projections)
- Median year-end 2026 rate at 3.8%, implying one 25bp hike this year
- 9 officials favor a rate hike this year (3 for +25bp, 5 for +50bp, 1 for +75bp); only 1 sees a rate cut
- 2027 median rate at 3.6%, 2028 at 3.4%; rate cut cycle significantly delayed

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

Scenario 1: Baseline Neutral Scenario (60% probability, in line with Fed dot plot median expectations)
1. 2026 H2: One rate hike, no cuts for the year
- July FOMC: Maintain 3.50%-3.75% unchanged, release a clearly hawkish signal that "if data does not improve, September hike likely"
- September FOMC: Hike 25bp, rate moves to 3.75%-4.00%
Trigger conditions: Core CPI and PCE rebound for two consecutive months, services inflation continues rising, strong nonfarm payrolls
- November/December: No further rate adjustments for the year; year-end terminal rate 3.75%-4.00%

2. 2027: High rates maintained throughout the year, one small cut at year-end
- Full-year range maintained at 3.75%-4.00%, 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 2%; the Fed will not ease quickly

3. 2028: Formal start of rate cut cycle, two cuts in the year (total 50bp)
- 25bp cuts in March and June, rate drops to 3.00%-3.25%, gradually approaching the 3.1% long-term neutral rate

Scenario 2: Hawkish Extreme Scenario (25% probability, mainstream view of BofA and Deutsche Bank)
Core premise: Energy, tariffs, and services inflation remain persistently stubborn; AI investment drives demand overheating; inflation remains above 3.2% for the 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 September, October, and December, cumulative +75bp, rate at 4.25%-4.50%
2. 2027: No rate cuts all year, high rates maintained to suppress inflation
3. 2028 H1: Only then start rate cuts, only 50bp total for the year, very slow easing pace

Scenario 3: Dovish Mitigation Scenario (15% probability, views of UBS and Citi)
Core premise: Sharp decline in oil prices, continued drop in rent inflation, weakening employment, rising trend in initial jobless claims, rapid inflation decline
1. 2026: No rate hikes all year, maintain 3.50%-3.75% unchanged
- Citi extreme dovish: Two rate cuts in October and December, cumulative 50bp for the year, year-end rate 3.00%-3.25%
2. 2027 H1: Accelerated rate cuts, 2–3 cuts in the year, rate quickly returns to neutral range

III. Key Indicators for Determining Rate Hikes/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 >200k, unemployment rate stays below 4.3%
3. Geopolitical conflict in the Middle East pushes crude oil prices higher, leading to imported inflation rebound
4. Broad-based goods and services inflation spreading, not a one-time disturbance

Preconditions for Turning to Rate Cuts (Hard to ease without all conditions)
1. Core PCE consistently falls below 2.7% with a downward trend for three consecutive months
2. Significant labor market weakening: unemployment rate rises above 4.6%, nonfarm payrolls fall below 100k
3. U.S. consumer and manufacturing PMIs continue to contract, hard recession risk rises
4. Oil price and import tariff inflation pressures fully subside

IV. 2026-2028 Complete Rate Path Comparison Summary Table

Time Frame Baseline Neutral (60%) Hawkish Extreme (25%) Dovish Mitigation (15%)
2026 H2 Sept hike 25bp, year-end 3.75%-4.00% Sept/Dec hike 50bp total, year-end 4.00%-4.25% Full year unchanged / year-end cut 50bp
2027 Full Year Year-end cut 25bp, median 3.6% No cuts all year, maintained at 4.00%+ 2-3 cuts, median 3.25%
2028 Full Year 2 cuts totaling 50bp, median 3.4% 2 cuts totaling 50bp, easing only in H2 3+ cuts, approaching 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 cuts are realized, the dollar weakens persistently
2. U.S. Treasuries: Rising rate hike expectations push up yields on short and long-term Treasuries; rising rate cut expectations push bond prices up and yields down
3. Equities: High rates persistently suppress growth stocks and AI high-valuation sectors; start of rate cut cycle benefits tech and growth sectors
4. Commodities: Rate hikes negative for gold and oil; rising rate cut expectations positive for precious metals