To The Moon

I think this time the Fed raised interest rates by 25 basis points and the federal funds rate rose to 4.5~4.75%, in line with market expectations. The monetary policy statement acknowledges that inflation has slowed down, and Powell's conference was "dovish", with softer views on inflation, wages and financial conditions than before. However, the Fed needs to find a balance between the three objectives of anti-inflation, stable growth and risk prevention, so it will be more careful in the number of rate hikes afterwards.

The matter of the past violent rate hikes have caused the economy to slow down or even the risk of recession. And Fed Chairman Jerome Powell is being carried away by the market and is now accepting market views. Although the Fed ultimately to combat inflation as the goal before raising interest rates, but if the economy is in recession will also lead to corporate profits suffered, which will lead to a reduction in tax revenue. The Fed also has vested interests, and a recession will affect their profits.

So I think the Fed will "watch and react" and raise interest rates twice more, each time by 25 pips. About once in March and once in May to complete the whole cycle of interest rate hikes. I hope the economy is recovering faster than the interest rate, I believe this is what the Fed wants to see. As for the market and policy making, the Fed analyzes three dimensions of inflation: commodity inflation, rent, and service inflation excluding rent. In the labor market, the decline in inflation has not been accompanied by an increase in the unemployment rate, which has made the Fed more cautious.

On the monetary policy front, despite the Fed's emphasis on raising interest rates since the last meeting, financial conditions in the market have instead eased. The market deviated from the Fed's forward guidance on the path of interest rate hikes, and Powell responded in a relatively moderate manner, saying that the low interest rates counted in the market were due to market expectations that inflation would move down more rapidly, but did not forcefully "push back" against such expectations.

In the end, Powell still insisted that the Fed would not cut interest rates in 2023. The purpose is to allow the economy to recover in the post-epidemic period, so that interest rates remain unchanged and inflation is reduced to 2%, and the Fed will have achieved its mission.

@MillionaireTiger @TigerStars @CaptainTiger @MaverickTiger