Strong US Economy May Delay the Rate Cut, 4 Industries Poised to Thrive
The robust surge in the U.S. economy may halt expectations of a rate cut!The U.S. Gross Domestic Product (GDP) grew at an annualized rate of 3.3% in the fourth quarter, and the core inflation rate, upon which the Federal Reserve relies most, is currently at 2.9%, the lowest level since March 2021. As of now, the probability of a rate cut in March is approximately 50%, according to the interest rate market.CNBC Daily Open: Fed rate cut path in sharp focusDavid Wilcox, an economist at Bloomberg Economics, remarked, "If I were in his shoes, I'd try to dodge the press conference and keep things basically undisturbed. The likelihood of a rate cut in March is 50%... seems good to me. Any action by the Fed depends on specific data.Matthew Luzzetti, Chief U.S. Economist at Deutsche Bank, indicated
The Federal Reserve's September FOMC meeting took a wait-and-see approach with no interest rate hike. However, the dot plot and Chairman Powell's remarks appeared more hawkish, indicating a reduction in the expected number of rate cuts next year and a significant upward revision in economic data forecasts. The market experienced severe volatility, with the 10-year U.S. Treasury yield surging beyond 4.4% $iShares 20+ Year Treasury Bond ETF(TLT)$, and $NASDAQ(.IXIC)$ both dropped by 1.5%, while the $USD Index(USDindex.FOREX)$ broke through 105.6.Skipping September, why did most committee members support another rate hike? It's because the market had alrea
Wednsday, FOMC will announce the June interest rate decision. Before that, the May CPI data, especially the core CPI, released on Tuesday (June 13th), will serve as the final important guidance. Apart from investors' focus on whether the Federal Reserve's monetary policy will "pivot," they will also pay attention to the dot plot of interest rates and the summary of economic projections. Of course, Powell's remarks at the post-meeting press conference are also essential.Currently, there is a relatively high consensus in the market regarding the expectations for the June FOMC meeting. The baseline scenario is that the Federal Reserve will "skip" the rate hike in June and maintain the status quo, but at the same time, it will emphasize that this round of rate hikes is not yet over, hinting at
The Federal Reserve is convening once again to discuss interest rates over the next two days. Based on my analysis, I predict that there will be a 0.25% increase, marking the final hike for the year. Here's why. The first consideration is the impact that rate hikes have already had on the banking system. Banks have been hit hard by mark-to-market losses on their treasury bill holdings, as rising interest rates have pushed bond prices in the opposite direction. Several banks, including Silvergate Bank, Silicon Valley Bank, Signature Bank, and most recently First Republic Bank, have already suffered significant losses as a result of the recent rate hikes. Clearly something has broke. Given this situation, it seems unlikely that the Fed will adopt an aggressive stance on rate hikes in the nea
Banking Risk, High Interest Rate, and Potential Recession?
Risk events came in European and American banks recently. Both the Federal Reserve and the Swiss National Bank took immediate measures to deal with it. Although the market is questioning the methods appropriate, there are no obvious signs of system risk for now.Banking pressure increasedInterest rate hike in the past year has caused the problems of short-term borrowing and long-term mismatch in the banking industry to break out intensively. Recently, the capital outflow pressure of banks, especially small and medium-sized banks, is relatively high. However, from the overall situation, the pressure is still within the controllable range.According to th
Fed’s tightening monetary policy includes not only raising interest rates, but also shrinking its balance sheet, which has reduced by $626 billion since its peak in Apr 2022, mainly Treasury bonds and mortgage-backed securities. This could also affect market liquidity and change the yield curve to some extent. Interestingly, after last week’s “banking liquidity crisis”, the Fed restarted its Banking Term Funding Program (BFTP) to provide short-term liquidity support for banks. After announcing the changes in each item of its balance sheet as of March 15, investors easily noticed the sudden expansion of its balance sheet.Why did the Fed expand its balance sheet again? Fed has three ways to expansionary: 1. Open market operations (OMO), 2. Discount window, 3. Unconventional purchas
Just as how the market was blind-sided by the Ukraine-Russia conflict, I think we all should keep an eye out for the once-again deteriorating US-China relations (in the wake of the Chinese weather balloon's intrusion into US airspace), apart from just looking at US economic data & the Fed's next move in terms of monetary policies. US Secretary of State, Antony Blinken has just cancelled/postponed a scheduled trip to Beijing in Feb 2023 after calling the airspace intrusion "irresponsible" (https://www.cnbc.com/2023/02/03/us-secretary-of-state-blinken-postpones-high-stakes-trip-to-china-after-us-discovers-suspected-spy-balloon-.html). Prior to this incident, it had been widely reported in various media outlets that US 4-star General, Mike Minihan, had predicted an open US-China conflict
Strong US Economy May Delay the Rate Cut, 4 Industries Poised to Thrive
The robust surge in the U.S. economy may halt expectations of a rate cut!The U.S. Gross Domestic Product (GDP) grew at an annualized rate of 3.3% in the fourth quarter, and the core inflation rate, upon which the Federal Reserve relies most, is currently at 2.9%, the lowest level since March 2021. As of now, the probability of a rate cut in March is approximately 50%, according to the interest rate market.CNBC Daily Open: Fed rate cut path in sharp focusDavid Wilcox, an economist at Bloomberg Economics, remarked, "If I were in his shoes, I'd try to dodge the press conference and keep things basically undisturbed. The likelihood of a rate cut in March is 50%... seems good to me. Any action by the Fed depends on specific data.Matthew Luzzetti, Chief U.S. Economist at Deutsche Bank, indicated
The Federal Reserve's September FOMC meeting took a wait-and-see approach with no interest rate hike. However, the dot plot and Chairman Powell's remarks appeared more hawkish, indicating a reduction in the expected number of rate cuts next year and a significant upward revision in economic data forecasts. The market experienced severe volatility, with the 10-year U.S. Treasury yield surging beyond 4.4% $iShares 20+ Year Treasury Bond ETF(TLT)$, and $NASDAQ(.IXIC)$ both dropped by 1.5%, while the $USD Index(USDindex.FOREX)$ broke through 105.6.Skipping September, why did most committee members support another rate hike? It's because the market had alrea
Wednsday, FOMC will announce the June interest rate decision. Before that, the May CPI data, especially the core CPI, released on Tuesday (June 13th), will serve as the final important guidance. Apart from investors' focus on whether the Federal Reserve's monetary policy will "pivot," they will also pay attention to the dot plot of interest rates and the summary of economic projections. Of course, Powell's remarks at the post-meeting press conference are also essential.Currently, there is a relatively high consensus in the market regarding the expectations for the June FOMC meeting. The baseline scenario is that the Federal Reserve will "skip" the rate hike in June and maintain the status quo, but at the same time, it will emphasize that this round of rate hikes is not yet over, hinting at
The Federal Reserve is convening once again to discuss interest rates over the next two days. Based on my analysis, I predict that there will be a 0.25% increase, marking the final hike for the year. Here's why. The first consideration is the impact that rate hikes have already had on the banking system. Banks have been hit hard by mark-to-market losses on their treasury bill holdings, as rising interest rates have pushed bond prices in the opposite direction. Several banks, including Silvergate Bank, Silicon Valley Bank, Signature Bank, and most recently First Republic Bank, have already suffered significant losses as a result of the recent rate hikes. Clearly something has broke. Given this situation, it seems unlikely that the Fed will adopt an aggressive stance on rate hikes in the nea