(Yicai) Feb. 1 -- The US Federal Reserve may start to lower interest rates in July, and cut them three times this year, to reduce rates by 75 basis points in total, said an economist at US credit rating agency Fitch Ratings.

"I think the Fed will be slow but steady in terms of taking rates down," said Olu Sonola, head of US Regional Economics at Fitch Ratings. But in the medium term, rates are not likely to fall back to pre-pandemic levels, being trimmed to between 3 percent and 3.5 percent ultimately, he added.

The Fed kept interest rates untouched at between 5.25 percent and 5.50 percent at its first interest rate meeting this year.

“The Fed has a terminal rate of about 2.5 percentiles over the next two years," Sonola said. "Possibly it may be slightly higher. There are many factors at play including inflation, geopolitics and wage growth, which may mean that you need a slightly higher policy rate," he added.

Personal consumption expenditure, a key inflation indicator, dropped below 3 percent in December last year. But the consumer price index, another measure of inflation, and core CPI, which excludes prices of food and energy, are still above 3 percent.

New York-based Fitch predicts that the CPI will tumble to 2.6 percent by the end of the year.

"You will need to see housing and wages, two major components of inflation, come down a lot quicker for us to get to 2 percent on a sustained basis," he added.

Editor: Kim Taylor