Recently,Federal ReserveChairmanPowellThere has been an astonishing shift in attitude. At a meeting, he said suddenlyFederal Reservewill be discussedCut interest ratesThis is a radical departure from the previous position. What exactly happened behind this shift, and what made itFederal ReserveChanged the direction of policy in such a short period of time?Some people speculate that it is the result of Biden's pressure, but is this really an adjustment made for the sake of ***?Let's take a look at this question together.
PowellAsFederal ReserveThe chairman plays a pivotal role. American PoliticsSystem requirementsFederal ReserveThe president is independent of politics and serves the United StatesEconomyto avoid being affected by the maelstrom of politics. However,PowellNot only the United States, but also the central banks of the world have a significant impact, so some call him the "uncrowned king" of global finance.
In early December, the United States announced the month of OctobercpiThe index beat market expectations, indicating that inflation in the United States is in good shape. However, in this context,PowellHowever, the statement was relatively hawkish, claiming that inflation was substantially under control, releasing a hawkish signal. And the bigwigs of Wall Street are generally **Federal ReserveThe rate hike cycle has ended, whilePowellSince then, the stance has also been relatively neutral. But after two weeksFederal ReserveAt the meetingPowellbut admits that it is being discussedCut interest rates, and even gave the next yearCut interest ratestimeline. That's rightFederal ReserveThe financial landscape of the United States and the world as a whole is a huge turning point.
However, this shift is not due to suddennessEconomydata orMonetary policyAdjustments. In fact, during these two weeks, things like sales and non-farm payrolls have shown that inflation is likely to rise, which should be the reason to support a rate hike. So, in just two weeksFederal ReserveThe sharp change in attitude did not meet expectations.
Some speculate that behind this shift is the result of pressure from Biden. Biden wants to be re-elected, and one of his biggest political capitals is the so-called "Biden."EconomyLearning", that is, to put America first in industry and adopt loose stimulus policies in finance to support the United StatesEconomydevelopment. However, this policy has led to inflation problems, and Biden wants the Treasury Department andFederal ReserveCooperate with interest rate hikes and tightening policies to prevent the United States from falling into stagflation. Therefore, Biden may exert pressureFederal ReserveChange your stance to maintainEconomyGrow and keep yourself in power.
First, the U.S. fiscal and debt situation is dire, and maintaining high interest rates will lead toFiscal deficitsincrease,** at risk of closing. Higher interest rates will also lead to higher interest payments by the Treasury when it issues and replaces government bonds, increasing the debt burden. To avoid a debt collapse, Biden needs to do it as soon as possibleCut interest ratesto alleviate financial pressure.
Second, the United StatesEconomyThere are already signs of a recession, rising unemployment, and increased business failures and bankruptcies, which have negatively impacted Biden's approval ratings. In order to avoidEconomyrecession, provided for their own re-electionEconomyGuarantees, Biden needsCut interest ratesto stimulateEconomyIncrease.
However, we cannot completely rule out other factorsPowellA change in attitude. For example,InternationalEconomyThe situation may change rightFederal Reserve's decisions have an impact. Many central banks around the world have already begun to take easingMonetary policy, such as the European Central Bank and the Bank of Japan, to the United StatesMonetary policyA certain amount of pressure is generated. In addition, globalEconomyThe impact of slower growth and friction may also be promptedPowellAdjust the policy.
In short,PowellThe change in attitude impliesFederal ReserveForEconomyUncertainty about the direction. Whether it is Biden's pressure or other factors, this shift will undoubtedly give financial markets andEconomyBringing uncertainty and volatility. We need to keep an eye on itPowellwithFederal ReserveForEconomyperception of the situation and policy adjustments, as well as the impact of these adjustments on the globeEconomyimpact.