The biggest event of the week is undoubtedly the Federal Reserve's interest rate meeting. But now it seems likely that the Fed will do nothing at this meeting.
Prior to this, China had already played a whole set of combination punches, but the Fed may not dare to take the deal due to the contradictory data on the US economy.
Normally, the Fed should cut interest rates, whether from the perspective of internal factors or external factors, the Fed is cutting interest rates now, in fact, it makes sense.
First of all, from the perspective of the US economy itself, the latest core PCE index has a clear **, which is the inflation data that the Fed is most concerned about. Judging from this data, the inflation rate in the United States seems to have gradually declined, and it is still maintaining 5A 25% interest rate is clearly too high.
In addition, although the GDP growth rate of the United States reached 25%, but if you look at it quarterly, the Q4 quarter-on-quarter was 33%, apparently up from 52% is a lot lower. This shows that the U.S. economy is in a downturn, and from this point of view, interest rate cuts are also needed.
And, more importantly, the United States also has external pressure from China.
Why?
This brings us to China's recent series of combinations.
First of all, at the beginning of the month, the central bank provided a set of data to the outside world, and we found that the central bank's balance sheet expanded by 4 trillion yuan in 2023.
The Fed is shrinking its balance sheet to control inflation, and the current pace of balance sheet reduction is up to $95 billion per month, after data showed that the Fed's balance sheet was shrinking by more than $1,000 billion.
Obviously, China's central bank's actions are the opposite of those of the United States, and the downward trend of the global economy puts a lot of pressure on the Fed.
And this month, China's central bank also announced a RRR cut and an interest rate cut at the same time.
This includes a 0.0. reduction in the reserve requirement ratio from 5 February5%, at the same time, it will also support agriculture, support small and medium-sized reloans, and reduce the discount rate by 025%。
Relevant experts also ** that because the scale of this RRR cut is more than expected, it is very likely that the LPR interest rate will also be lowered next month.
Under China's series of balance sheet expansion, RRR and interest rate cuts, it is natural for the Fed to cut interest rates.
However, the Fed has learned its lesson, which makes it difficult to start cutting interest rates lightly at this time.
When inflation first began, the Fed took it lightly and was blindly optimistic, resulting in a missed good opportunity to control inflation early.
Now that inflation is possible at any time, the Fed is likely to maintain a wait-and-see attitude at this week's interest rate meeting.
Although the PCE index has **, the previous CPI index has appeared significantly**.
And the recently reported growth rate of personal consumption expenditures in the fourth quarter was 28%, higher than expected. At the same time, the latest personal spending in December also rose by 07%, also higher than expected.
On the one hand, the higher-than-expected spending certainly shows that the U.S. economy is not bad, but more importantly, it shows that inflationary pressures in the U.S. are still very strong.
Clearly, many on Wall Street are still cautious. UBS's chief investment officer, Lefkowitz, recently warned that the United States could fall into a full-blown recession in the next 6 to 12 months.
His reasoning is that there is a lag effect in raising interest rates, and now that household cash in the United States is getting less and less, it will be difficult to support future consumption, and the American economy is expanding.
Not long ago, Xiao Mo, a well-known investment bank, warned Americans from another angle that the current US Treasury bonds of more than 34,000 billion are a mine that may be detonated at any time. As the deficit continues to grow, so does the cost of debt servicing paid by the U.S. Treasury. Today's debt problem is unlikely to be sustainable.
Originally, if the Fed cut interest rates quickly, it would have further postponed the debt crisis, but now the Fed does not dare to cut interest rates. The longer the current high interest rates are maintained, the worse the economic crisis in the United States will become.
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