Reporter of the Economic Business: Cai Ding Reporter of the Economic Business Business: Lan Suying
At 2 a.m. Beijing time on Thursday, June 16, Fed will announce the June interest rate resolution, and then Federal Reserve Chairman Powell will preside over a regular press conference.
After the US CPI data "exploded" in May last Friday, the latest Fed's interest rate decision will surely attract global attention. The wording of the FOMC policy statement and Powell's remarks may reveal a clue: whether stronger austerity will be taken next to try to control the highest inflation in 40 years.
As of press time, there are less than 10 hours left before the Federal Reserve announced the monetary policy statement in June. The market has already predicted that the Federal Reserve will aggressively raise interest rates. As of 15:00 Beijing time on the 15th, the federal funds futures market pricing tool "FedWatch" showed that the market has completely ruled out the probability of the Federal Reserve raising interest rates by 50 basis points at this meeting.
The futures market only gives two probability of the Fed's interest rate hike this time: the probability of 75 basis points is 95.6%, and the probability of 100 basis points is 4.4%.
Image source: "FedWatch"
The probability of raising interest rates by 75 basis points has increased significantly, which may be related to the continuous calls from Wall Street investment banks in recent days. According to incomplete statistics from reporters of " Daily Economic News ", as of press time, including Barclays (BCS, stock price of US$7.57, market value of US$31.67 billion), Deutsche Bank (DB, stock price of US$9.59, market value of US$19.82 billion), and Capital (Capital) Economics), Goldman Sachs (GS, stock price of US$282.54, market value of US$97.04 billion), JPMorgan Chase (JPM, stock price of US$114.06, market value of US$335 billion), Jeffrey, Nomura (NMR, stock price of US$3.6, market value of US$11.06 billion), Faxing , Wells Fargo (WFC, stock price of US$37.43, market value of US$141.9 billion), made predictions, believing that the Federal Reserve will raise interest rates by 75 basis points at this FOMC meeting. It is worth noting that Barclays is the first investment bank on Wall Street to shout "the rate hike will be raised by 75 basis points."
Jonathan, former chief economist of the Research and Statistics Department of the Federal Reserve Board of Directors and now senior US economist at Barclays Millar said in a research report to the Daily Economic News, "Historically, while the Fed has avoided making decisions that surprise the market, we believe that this week's meeting may be an exception. Given that recent inflation data far exceeds expectations, the Fed should want to take a tougher (hawkish) stance than expected. We believe that the probability of the Fed raising interest rates by 75 basis points this week and July FOMC meetings is high, but compared with the probability of 75 basis points this week's meeting."
Jonathan ·Miller's team also pointed out in the report that "(U.S. May) both the overall CPI and core CPI growth rate are far beyond expectations, and if this is just because of energy prices, we can ignore it. But all sub-items in this inflation report are strong and the trend is getting stronger. Used car prices are rising again, aviation expenses are increasing, and rental inflation is accelerating. Inflation pressure is not only intensifying, but also expanding."
JPMorgan Chase and Goldman Sachs raise the rate hikes later than Barclays. JPMorgan economist Michael Feroli hinted that long-term inflation expectations unexpectedly rose and Fed officials would not be subject to the previously suggested 50 basis points rate hikes. He even believes that the Fed may raise interest rates by 100 basis points this time.
After the US CPI inflation was announced in May, the yield on US bonds soared. This trend continued after opened on on Monday. The yield on 2-year US Treasury bonds once climbed 11 basis points to 3.17%, the highest since 2007. On the evening of the 14th, Beijing time, the yield on the 10-year U.S. Treasury rose to 3.45%, continuing to hit a new high since 2011.
Mitsubishi UF Financial Group Global Market Research Director Derek Halpenny said in a comment email to the Daily Economic News that "if the Fed raises interest rates by 75 basis points this time and leaves the market with the possibility of raising interest rates by 75 basis points at next month's meeting, it may cause the front-end interest rates to rise.To catch up with market pricing, dot map also needs at least (display) 2 interest rate hikes of 75 basis points. Even if the Fed raises interest rates aggressively this week, the dot chart still cannot keep up with the trend of the (yield rate) curve. "
" What the Fed needs tonight is a firm monetary policy stance and calm communication with the market. Considering that the Fed has found itself in a losing streak, this means the dollar may strengthen further after the interest rate hike, and financial conditions will be tightened further in the short term, but the ECB statement will help to fight the strong dollar tonight. ” Derek Harpenney added.
Daily Economic News
