As we all know, the Federal Reserve, as a global central bank, influences the monetary policy of the United States and the world, and the speech of the chairman of the Federal Reserve is even more instructive.
However, Powell's recent "hawkish" remarks not only did not dampen the market's enthusiasm for the end of the inflation crisis, but once again solidified the US market's assertion that the interest rate hike cycle has ended.
So why is the trend of the market not consistent with Fed Chairman Powell's speech?
Didn't Powell's words work?Today we will talk about this topic, code words are not easy, welcome to like, collect,**
In a recent speech,Fed Chairman Jerome Powell gave his opinion on domestic inflation.
In his opinion, the Fed's policy in response to the inflation crisis has "reached a rather restrictive" levelThis means that Powell feels that the Fed is right to keep raising interest rates in order to curb inflation, and the subtext is that the Fed has raised interest rates and cannot increase them, and the interest rate hike cycle is basically over.
This is seen as the clearest signal from the US authorities about the end of the "interest rate hike cycle".
Normally, the Fed is either in a rate hike cycle or in a rate cut cycle with only a short period of time as a buffer. So the market generally thinks,The transition between the rate hike and the rate cut cycle will not be very long. It is expected that in May 2024, the United States will begin to release water and cut interest rates.
However, Powell's speech said that it is "too early" for the market to judge now that the Fed has taken enough restrictive policies, or when it will be eased.
To put it bluntly, Powell thinks that although we don't add information now, if inflation is really ***, maybe we will still raise interest rates.
And do you think the Fed will ease water in May next year?Isn't this a little early?Whether to cut interest rates or raise interest rates, what you say doesn't count, only what I say.
He then added that we are prepared to tighten policy further if appropriate. This sentence is actually threatening and suppressing the market's interest rate cut expectations.
In just a few words, Powell expressed his belief that the Fed does not need to raise interest rates. And then to the point where the time to cut interest rates will not be so fast, and then to the shift that the Fed will continue to raise interest rates if the inflation problem is not resolved.
And the cloudy way of speaking was ultimately judged to be a "hawkish" speech, after all, Powell also threatened to raise interest rates again.
Generally, after Powell's hawkish speech, the market will respond according to the tendency of his speech, for example, the hawkish speech is generally down, and the ** speech is up。But this time the situation is different, the market is not afraid of Powell's hawkish speech, but began to reverse**, which can be regarded as a direct slap in the face of Powell...... swollen
Recession is coming!Will the Fed "cut interest rates precautionarily"?
What market is ignoring Fed Chair Powell's words?Because everyone is a top economist, a lot of economic data has predicted the future direction of the U.S. economy, and these data can basically "kidnap" the Fed's monetary policyUnless Powell defends the world's condemnation and forcibly introduces some rebellious policies in violation of the law, he must obediently implement them in accordance with the laws of the economy.
Wall Street experts rely on data that the U.S. economy began to slow down in the third quarter.
According to the data, the preliminary manufacturing PMI index in the United States in November was 494, hitting a new 3-month low, exceeding expectations and lower-than-expected 498。It shows that the recession in the U.S. economy has had a deeper impact on the manufacturing industry.
Not only that, but the data on the real estate side is also poor, with Fannie Mae saying that even in the best-case scenario, the U.S. economy can have a soft landing next yearHowever, it is also difficult for the U.S. real estate market to quickly get out of the "deep recession" state, so real estate will continue to drag down the U.S. economy for some time to come.
In terms of the employment rate, the US non-farm payrolls data in October has turned from strong to weak, and the number of new jobs has fallen sharply, well below the average. Not only hit a new low in 2 years,It also triggered signs of a recession, causing the US 10-year Treasury yield and the dollar index to fall sharply.
At present, there is another relatively serious problem in the US economy, which is "high interest rates".
Excessively high interest rates on deposits and loans have directly led to a sustained depression in the U.S. economy, and the vitality has begun to weakenThe root cause of the banking crisis and the real estate crisis in the United States is actually the impact of high interest rates.
High interest rates in the United States have led to a continued weakening of economic vitality.
So judging from all indications, the U.S. economy has begun to decline from the previous signs of overheating. The key to the follow-up is whether the US economy will be in a shallow recession or a deep recession.
Therefore, if the Fed does not want the United States to fall into a deep recession, then it will certainly not take further interest rate hikes to suppress the U.S. economy, otherwise a soft landing of the U.S. economy will become a hard landing, and the financial system will be more fragile. The U.S. domestic economy will also accelerate the downturn, which will continue to weaken the U.S. economy.
The market also came to a conclusion based on the Fed Watch tool:The probability that the Fed will keep interest rates unchanged in December is as high as 988%, and the probability of a rate hike is only 12%。
It is precisely because of this that Wall Street ignores Powell's "threat", because they know that a recession in the US economy has arrived. And the Fed is actually "running nowhere".
So how will the Fed respond?We know that Wall Street in the United States is full of rich people, and the economists hired are all top bigwigs from various top universities, the kind that have won the Nobel Prize in economics, and the market has actually prescribed a "prescription" based on the opinions of these economic bigwigs.
Their advice was also simple and crude. Historically, for every recession, the Fed has cut interest rates by 300-400 basis points over a period of 1 year to deal with the crisis. The Fed will dynamically adjust the timing and intensity of U.S. interest rate cuts according to the speed of the recession.
So in the future easing cycle,You will still see the Fed's contradictory dialogue and monetary strategy, which may say that it will cut interest rates quickly today, and never mention it when it meets next week, saying that it can be "slowed down".
For the Fed, the current mess in the United States is much more complicated than it used to be.
The first is what we mentioned, the Fed must maintain a balance between the recession and the inflation crisis, so that the US recession does not go so fast so as not to fall into a deep recession and a hard landing;At the same time, it is necessary to keep inflation falling and avoid a large **.
Secondly, there are serious internal divisions in the United States itself.
Bipartisan Congress **, as well as the unrestrained budget of the Democratic Party, put the US finances in a very dangerous situation. After all, a $2 trillion annual deficit and hundreds of billions of dollars in interest payments will crush America's finances.
Finally, there is the hegemony of the dollar and the disintegration of the fundamentals of the US economy。The U.S. economy has been in a long-term crisis of nearly $34 trillion in U.S. Treasury bonds, and Moody's and Fitch, among the three major international rating agencies, have previously downgraded the long-term rating outlook for the U.S. economy.
If the remaining rating agency does not want to lose its authority, it will inevitably choose to ignore the threat of the US Treasury and downgrade the US rating.
And this has already highlighted the crisis of the US fiscal and US debt.
After all, even their own families dislike their own families, and the mess in the United States can be said to be rotten to a certain extent.
Closer to home, for the Fed and Chairman Jerome Powell, the U.S. economy is a mess.
The Fed must continue to protect the U.S. economy and safeguard U.S. interests while maintaining its independence
But despite Powell's attempts to keep his balance and face so many difficult problems, he is really "in a dilemma".