Salman Ahmed, Head of the Global Macro and Strategic Asset Allocation Department at Fidelity International, stated in a post that the Federal Reserve's goal for this year is still to cut interest rates three times. However, there are initial signs showing that the Fed may have to accept higher inflation than previously expected, and may even be forced to delay the interest rate cuts. Despite the unexpected improvement in inflation over the past two to three months, the Fed still wants to cut interest rates. He believes that the Fed has already reiterated that if they are able to cut rates, June will be the time to begin the rate-cutting cycle. Firstly, although the Fed's dot plot for 2024 still includes three rate cuts, there has been a change in the expected interest rate dot plot for 2025. Inflation has unexpectedly remained high. Core services inflation has not changed since last October and remains above target levels. However, the Fed still indicates that it is highly likely to begin the rate-cutting cycle in June. Secondly, the Fed's long-term rate forecast has been slightly raised from 2.5% to 2.6%. While the increase is small, this is the Fed's first upward revision in the current cycle for the neutral rate R*, and is something to watch in the future. Given the continued strength of the US economy, if the Fed's view on the neutral rate R* starts to change, it indicates that both inflation and rates may ultimately be higher than in the past. Fidelity International has long believed that the average inflation rate for the next ten years will reach 3%. The surge in inflation in 2021 is not a short-term phenomenon, with many factors indicating that inflation will remain high to some extent, including globalization (albeit slow-paced), decarbonization, and the impact of defense spending. The world is currently facing two wars, and these conflicts may have far-reaching effects in the coming years. While central banks will not admit it, they will tolerate higher inflation in the future. Inflation has not yet reached the target level, and the Fed is still unwilling to cut rates immediately, indicating that they tolerate inflation above the target level. On the other hand, financial markets expect rates to fall, and there is a strong desire for the Fed to fulfill its promised rate cuts immediately. Before June, the US will release three rounds of data, explaining why the Fed does not want to muddle the waters too early. In fact, there are plenty of reasons to support the view that inflation may persist. The real challenge in this battle against inflation lies ahead. The developments in the next two to three months are crucial, and any data released before June that may prevent the Fed from cutting rates will have an impact on the market. Since last October, Fidelity International has been inclined to take risks and believes that the economy will first experience a soft landing, keeping the stock market optimistic in the first half of this year. However, the situation has changed. The market has fully accepted the view of an economic soft landing. We are now facing the risk of a "non-landing," where market expectations are no longer for rate cuts, and may even turn to some degree of rate hikes. Although we are still some distance away from this outcome, the bank has always believed that the economy will eventually fall into recession, and the risk is that if inflation data continues to remain high, the market will be forced to reassess and reallocate. If rate cuts are not implemented, interest rates will remain high for a longer period, which would require the bank to reassess their analysis from last year regarding economic recession and when it will occur, and consider the impact of long-term high real interest rates.