Federal Reserve board member: Fed will be more cautious in cutting interest rates, and the high valuation of US stocks is prone to significant pullback

In a speech on Monday, U.S. Federal Reserve Governor Lisa Cook noted that the Fed may be more cautious about further rate cuts in the future, given that the economy is solid and inflation is more tenacious than previously expected. CME Group's Fedwatch tool predicts a more than 90% chance that the Fed will pause rate cuts in January. (Synopsis: The dollar rose to a near two-year high!) Analyst: Fed rate cut outlook and Trump policy are bad for BTC) (Background supplement: Bloomberg opens the Fed: "dot plot" is the biggest source of chaos in the market, it is recommended to cancel to reduce economic shock) US Federal Reserve Governor Lisa Cook said in a speech at the University of Michigan on Monday (6) that the Fed may remain cautious about further interest rate cuts in the future, given that the economy remains solid and inflation is stickier than previously expected. Speaking about the coin policy, she noted: Over time, I still think it may be appropriate to shift the policy Intrerest Rate to a more neutral stance. I've always envisioned picking up the pace in the early stages of policy easing and then gradually slowing down as the Intrerest Rate approaches neutrality. In addition, the labor market has become more resilient since September, while inflation has been more sticky than I expected at the time. So I think we can be more cautious about further rate cuts. She stressed that the magnitude and timing of future policy changes in the Intrerest Rate will depend on upcoming data, changing outlooks, and the balance of risks. More than 90% chance of suspending rate cuts in January The Fed has dropped policy Intrerest Rates by a full 1 percentage point in three meetings since last September, although the latest dot plot released in December has strongly hinted that the pace of rate cuts in 2025 will slow significantly, by only 2 yards by the end of the year, down from 4 yards expected in September. CME Group's Fedwatch tool shows that traders expect the Fed to maintain the policy Intrerest rate at the current range of 4.25% ~ 4.5% at its next meeting on January 28 and 29 with a 91.4% chance. Markets are following the upcoming December non-farm payrolls data on Friday, as well as the minutes of the Fed's December meeting, to interpret the Fed's stance on further rate cuts. U.S. stock valuations are on the high side, prone to sharp declines On the other hand, in her speech, Cook said she sensed a "good start" to the U.S. year, with fairly strong economic growth in 2024, inflation down sharply from its peak two and a half years ago (though still a long way from the 2% target), a solid labor market, unemployment remains relatively low by historical standards, and the average American wage is still growing faster than inflation. In terms of financial stability, Cook said that while funding risks in the banking system have declined, some non-bank financial intermediary institutions (NBFIs), including some large Hedging funds, do have high leverage. Non-bank financial institutions may also face liquidity pressure from factors such as market fluctuations. Valuations have risen across many asset classes, including equity and corporate debt markets, where the estimated risk premium is near the bottom of their historical distribution, suggesting that the market may be "perfectly priced" (meaning that the stock price is already high) and prone to a sharp decline in the event of economic unfavourable information or a change in investor sentiment. In addition, she continues to follow the risk of a significant decline in commercial real estate such as office towers since 2022. Guarding Against Financial Stability Risks from AI Innovation Cook concluded by saying that private credit, Stable Coin, cyberattacks and artificial intelligence (AI) are areas she is monitoring closely. Despite the rapid growth of private lending, the sometimes underappreciated connections between lenders in it can exacerbate vulnerabilities created by leverage stacks and even shock the overall financial system. The fact that Stable Coins are pegged to reference assets makes them structurally vulnerable to "bank runs." If a bank run occurs for a large Stable Coin, the liquidation of the assets supporting that Stable Coin could be disruptive, especially if those assets are pegged to other financing markets such as commercial paper or certificates of deposit. The number of cyberattacks against financial institutions has multiplied, potentially causing business disruption and loss to the financial system. The growth of AI tools, especially generative AI, may be a source of innovation in the financial system, but it will also be a source of systemic risk if people rely more on a few large models to make decisions in the future that are biased or error-based. Related reports BTC rose 5% overnight, breaking through $99,000! BCA Research: Three reasons why the Fed will cut interest rates by more than 2 yards next year The US PCE index in November is generally lower than expected! Has inflation been contained? Fed officials expect Intrerest Rate to drop sharply next year Fed Speaker: Fed's ultra-low Intrerest Rate era is over, Trump grasps the key to 2025 interest rate cuts (Fed Governor: Fed will be more cautious to cut interest rates, U.S. stock valuations are high and easy to pull back" This article was first published in BlockTempo "Dynamic Trends - The Most Influential Block Chain News Media".