PANews reported on December 22 that according to Jinshi, Barclays Bank said that one of the factors that may keep US interest rates high is US (inflation) policy. At the December meeting, some FOMC participants apparently began to reflect expectations of tariffs in their inflation forecasts. In addition, even among those who did not adjust the official forecast, many now believe that the balance of inflation risks is tilted to the upside. Although Powell did not clearly answer the extent to which the Fed tends to look through tariff-related price level increases, we believe that it will be a challenge for the Fed to continue to cut interest rates when tariffs are expected to cause inflation to intensify in the second half of 2025, especially against the backdrop of rising inflation rates in recent years. We expect the Fed to pause rate cuts after June next year and resume rate cuts around mid-2026 after inflation pressures caused by tariffs dissipate. In our baseline, we expect two 25 basis point rate cuts in 2026, with a terminal rate of 3.25-3.50%.