-This is the Fed's last attempt, putting everything on the line.
As expected, the Fed raised interest rates by 75 basis points to 3%-3.25% for the third consecutive time. Although this result is in line with expectations, it is still "rare" and caused market panic.
-The US stock market fell sharply across the board, and the Dow Jones index fell 1.7% to 30,183.78 points; The S&P 500 index fell 1.7% to 3789.93 points; The Nasdaq index fell 1.8% to 11,220.19 points;
-Bitcoin fell 0.28% to $18,918.08, and Ethereum fell 2.16% to $1,313.67
-The US dollar rose to a 20-year high and the euro fell to a 20-year low;
-The price of gold plummeted once in intraday trading, but closed up;
The yield of-2-year US bonds rose above 4%, breaking through this barrier for the first time since 2007.
From the details of the policy statement and Powell's speech, the Fed put everything on it by sending the signal of raising interest rates sharply and singing itself empty.
1. Sent a signal to continue to raise interest rates sharply (Bitmap interest rate is higher than market expectation).
The "bitmap" is the most important focus of this meeting, which can get a glimpse of the Fed's view on the prospect of monetary policy, that is, reasoning when to end the interest rate increase and how high the interest rate will be when it ends.
-The Federal Reserve expects the interest rate to rise to 4.4% by the end of this year, which is 100 basis points higher than the bitmap forecast released last time
-It is expected that the interest rate will rise to 4.625% in 2023 (peaking in the first half of next year), which is higher than the market forecast of 4.5% (which caught investors off guard)
-It is estimated that the interest rate will drop to 3.9% in 2024 and 2.9% in 2025.
The bitmap is carefully planned to convey the message that there will be more interest rate hikes this year than market expectations, and that interest rate hikes next year are more likely than none.
2. The hope of a soft landing is fading.
Given the new interest rate forecast, the Fed is pushing the economy to a hard landing, in other words, the Fed is rescuing inflation in the form of recession.
Powell said that we must control inflation, and I also hope there is a painless way, but unfortunately there is no reality. Rising interest rates, slower growth and a weaker labour market are painful for people, but they are better than losing control of inflation and being forced back to raising interest rates in the future.
3. It is rare to warn that the US real estate market may usher in an adjustment.
This is equivalent to singing empty yourself.
Powell said that the real estate market may have to undergo an adjustment to achieve a better balance between supply and demand, reasonable price increase and affordable housing. However, it will take some time for house prices and rents to cool down more obviously, and housing cost inflation will remain high for some time. Hope for the best and prepare for the worst.
4. There are still two possibilities for the next meeting.
Powell admitted that the median quarterly forecast means that another 125 basis points of interest rate increase is needed this year. However, the Committee members have not made a decision on the rate increase for the next meeting, and quite a few officials tend to add another 100 basis points before the end of the year-that is to say, the remaining two meetings this year are still two possibilities, raising interest rates by 100 basis points (50 basis points in November and 50 basis points in October) or 125 basis points (75 basis points in November and 50 basis points in October).
Still emphasizing his determination to keep interest rates higher for a longer period of time (he chose to express greater concern about inflation), but still choosing not to disclose his plan of "reducing the rate of interest rate increase", he still told the market that November is possible (so as to maintain greater flexibility). There is said to be disagreement within the Fed over whether to narrow the rate hike to 50 basis points in November or continue to raise interest rates by 75 basis points.
The interest rate futures market expects the Fed to raise interest rates by another 75 basis points in November with a 72% chance.
5. The Federal Reserve updated its economic forecast, but it was optimistic.
-The Federal Reserve predicts that by the end of next year and the end of 2024, the unemployment rate will reach 4.4% (only slightly higher than the long-term neutral level), higher than the forecast of 3.9% and 4.1% in June;
-The forecast of GDP in 2023 is lowered to 1.2%, and the forecast for 2024 is lowered to 1.7% (reflecting the continuous increase in the impact of tightening monetary policy)
-The forecast shows that inflation will not return to 2% until 2025
6. There is no negative vote.
The decision was unanimously endorsed by the Federal Reserve's internal united front to support Powell's efforts to fight inflation. Brad, the hawkish chairman of the St. Louis Fed, did not vote against it, nor did George, the dovish chairman of the Kansas Fed.
On the whole, the Fed is still conveying to the outside world that there is no doubt that it is firmly committed to reducing inflation to the target of 2% and will stick to it until its mission is completed. Mr Powell is trying to ensure that the Fed's message at the meeting is given a clear and appropriately hawkish interpretation.
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