The Reserve Bureau’s dovish raises interest rates and the chairman calms the market panic
The US Federal Reserve has expected the fourth rate hike this year. The federal funds rate target range has been raised by a quarter to 2.25% to 2.5%. However, after the meeting, the statement did not distribute the pigeons as the market imagined. Although policymakers have slightly lowered their economic growth forecasts for the next two years, they stressed that the job market has maintained a good momentum, economic activity has been growing at a strong pace, and the outlook risks are roughly balanced.
On the other hand, the “lattice map" revealing the interest rate outlook reflects that the Fed will increase the number of interest rate increases from three times to two times next year, but the interest rate futures market recently showed the most interest rate increase in 2009, the Fed The position of further tightening monetary policy is only softened at the most, and the rate hike cycle with the market is approaching the end of the first quarter of next year. There is a clear gap. “Dovish hike" (floating hike) fell short, the results of the interest rate announced that the once sharp rise in US stocks sharply turned around, the three major indexes closed down on Wednesday to the lowest level in more than a year.
The Fed’s interest rate has been particularly eye-catching, mainly thanks to two factors: First, US stocks have fallen more than 10% since the beginning of October, and the Fed will not adjust monetary policy in principle for “trusting the market”, but it is seen from the past. The actual situation may not be the case. According to records, since the 1980s, the Fed has raised interest rates by 76 times, only two of which occurred during the US stock market down cycle, which dates back to 1994. This may be purely coincidental, but investors are betting on “doves raising interest rates" on the occasion of Wall Street’s killings.
Second, US President Trump has repeatedly raised interest rates four times on visits and Twitter posts. This week’s attitude before the interest rate decision is especially “arrogant." Since Powell took over the Fed, most of his time has been quite straight. However, in the past two months, he has been arguing that the US interest rate is far from “neutral". The market hopes to pass the post-meeting statement and Powell’s speech at the press conference to see if the Fed can withstand the political pressure of the White House and independently determine the monetary policy.
In the face of market turmoil and political interference, Powell’s performance at the press conference was surprisingly calm, and the sharp questioning of “wheel warfare” was able to calmly see the tricks. He has repeatedly reiterated that the Fed looks at the overall financial situation. It will only “closely watch" the increase in volatility in individual markets to judge whether the relevant development will adversely affect the macro economy and subtly decently deny the market. Under pressure, rashly adjust the possibility of monetary policy. This is tantamount to pouring cold water on investors who are eager to rescue the Fed. It is no wonder that the US stock market reaction is so negative.
Regarding Trump’s speech attacks, Powell simply took the “congressional mandate" as a shield to make the media that entangled the Fed’s independence arbitrarily confusing. However, after Yellen’s unloading of the Fed’s chairman’s burden, he described his heartfelt feelings and described his decision to raise the interest rate every time. He always looked at the madman’s post in a treacherous manner, and he never saw the political pressure, not necessarily the central bank’s helm. The truth. However, what is in his place today is Powell. In addition to the hardship of the Fed’s independence, what kind of position can the media expect him to make?
Oil prices have recently plunged, and data on the US property market and auto sales have begun to reflect signs of economic slowdown. The long-term debts of the US are still upside down, and the recession seems to be close at hand. However, Powell not only failed to meet the expectations of the “Dove Rate hike" generation, but also emphasized the “automatic operation" (on autopilot) of the $50 billion monthly reduction in the balance sheet.
Hong Kong’s capital supply is still abundant. After the Federal Reserve has raised interest rates by a quarter, Hong Kong banks have not followed suit, and the best interest rates of the four major banks have remained unchanged. It is worth noting that although the market has repeatedly issued “warnings" to policy makers, the Fed’s attitude in raising interest rates has not changed significantly. Before the US economy fell into recession twice, the Fed lowered the interest rate on the grounds that the unemployment rate fell enough to stimulate prices and wages. It turned a blind eye to the alarm that the bond market had already sounded, and later proved that policy makers overestimated inflation. Underestimating the risk of recession, I hope this history will not repeat itself.