Reporter of the Economic Business: Cai Ding Reporter of the Economic Business Business: Gao Han
In the early morning of March 17, Beijing time, the Federal Reserve announced that it would raise the benchmark interest rate by 25 basis points to the range of 0.25%-0.5%, in line with market expectations and is its first hike of interest rates since December 2018.
After the Fed's interest rate resolution was announced, the three major indexes of U.S. stocks fell in the short term, and then rebounded sharply at the close of the day. As of the close, the Dow Jones Industrial Average rose 1.55%, the S&P 500 rose 2.24%, and the Nasdaq rose 3.77%. In addition, the 10-year treasury bond interest rate rose from above 2.160% to 2.192% on the same day.
Accompanied by the news that the Federal Reserve raised interest rates , gold futures and international oil prices both rebounded after falling. WTI crude oil rose slightly by about 1.3%, Brent oil rose by 0.9%, and COMEX gold rose by 0.9%. Mark Vitner, managing director and senior economist at Wells Fargo , said in an interview with the reporter of " Daily Economic News ", "The Fed's interest rate hike shows that it is working hard to return to the normalization of monetary policy . It turns out that the current inflation in the United States is more lasting than previously expected and has a wider impact. In addition, the Russian-Ukrainian conflict has triggered global uncertainty and will lead to the Fed being more cautious about hikes and balance sheet reduction."
Feder Chairman Powell Image source: Visual China - VCG111351309821
Voting Committee passed the interest rate resolution 8-1, and the only opponent believed that the interest rate hike should be raised by 50 basis points
Federal Open Market Committee (hereinafter referred to as FOMC) stated in the monetary policy statement that in the voting for this interest rate resolution, all voters passed the decision to raise interest rate by 25 basis points with an 8-1 vote. Specifically, Federal Reserve Chairman Powell, Vice Chairman Williams, San Francisco Fed Governor Bowman, Director Lyle Brainard, Kansas City Fed Governor George, Philadelphia Fed Governor Huck, Cleveland Fed Governor Mester and Director Waller all voted in favor of the 25 basis points interest rate hike. The only vote to vote against the voting was St. Louis Fed Governor Brad, who believes that the Fed should raise interest rates by 50 basis points instead of 25 basis points at this meeting.
In the policy statement, the Federal Reserve stated, "(U.S.) economic activity and employment indicators continue to strengthen. Employment growth has been strong in recent months and unemployment has also dropped sharply. Inflation remains high, reflecting the imbalances of supply and demand, rising energy prices and broader price pressures associated with the COVID-19 pandemic."
"The Russian-Ukrainian conflict has caused huge human and economic difficulties. The impact on the U.S. economy is extremely uncertain, but in the short term, conflict-related events may put additional upward pressure on inflation and put pressure on economic activity." The Federal Reserve added in the statement. The
policy statement finally added, "FOMC seeks to achieve maximum employment and 2% long-term inflation. With the proper firmness of the monetary policy stance, the FOMC expects inflation to return to the 2% target, while the labor market will remain strong. To support these goals, the FOMC decided to raise the target range of the federal funds rate to 0.25% to 0.5%, and expects the continued upward trend of the target range to be appropriate. In addition, the FOMC expects that at a next upcoming meeting, the Federal Reserve will begin to reduce its Treasury bonds, institutional debts and institutional mortgage-backed securities (MBS), i.e. "Balance sheet reduction".
is evaluating When the monetary policy is appropriate, the FOMC will continue to monitor the impact of the latest information on the economic outlook. If risks that may hinder the realization of FOMC's goals appear, the FOMC will be prepared to adjust its monetary policy position appropriately. The FOMC's assessment will consider a wide range of information, including public health conditions, labor market conditions, inflation pressure and expectations, as well as the development of financial and international events. "
"dot map" shows that the Federal Reserve will also raise interest rates 6 times this year
"Daily Economic News" reporters noticed that in addition to the FOMC monetary policy statement, the Federal Reserve's dot map shows that it expects the Federal Reserve to raise interest rates 7 times in 2022 (i.e., 6 times in addition to this time), while the expectations in December last year were only 3 times.
"We expect the Federal Reserve may raise interest rates 4 to 5 times this year, which is twice as low as the market expectation before the outbreak of the Russian-Ukrainian conflict.My feeling is that (in the context of the Russian-Ukrainian conflict) the Federal Reserve will raise interest rates more slowly, but will eventually raise the federal funds rate to a slightly higher level (than previously expected level). I expect the federal funds rate at the end of this round of rate hike cycle will be in the range of 3% to 3.5%. "Mark Wittner told the reporter of the Economic News.
Mark Wittner also has Bloomberg Economics (Bloomberg) Economics' forecasts match, which expects the Fed to raise interest rates to 3.25% sometime next year (the end of this cycle of interest rate hikes), which will be a new high since 2008. Fed policymakers currently expect the longer-term federal funds rate to be 2.4%, lower than the 2.5% forecast in December last year.
Following the announcement of the Fed's interest rate resolution, CME's "Feder Monetary Policy Watch (Fe) dWatch)" tool shows that the futures market's interest rate hike in May has decreased compared with before the announcement of the interest rate resolution. As of press time, the market expects that the probability of the Fed raising interest rates by 50 basis points at the FOMC interest rate meeting on May 4 is 32.9%, and the interest rate resolution was 53.8% when it was just announced.
Image source: FedWatch
"Daily Economic News" record The person also noticed that it is not only the Fed that is radical. Last week, the European Central Bank unexpectedly announced that it would reduce bond purchases more actively. In addition, the market currently expects the Bank of England to conduct the third consecutive interest rate hike on Thursday local time, and Brazilian Central Bank is also expected to raise interest rates by another 100 basis points on Wednesday local time.
In addition, in the economic forecast released by the Federal Reserve at the same time The bank expects U.S. inflation to reach 4.3% this year — significantly higher than previous expectations, but will fall back to 2.3% in 2024. In addition, the Federal Reserve's forecast for U.S. economic growth in 2022 has been lowered from 4% to 2.8%, but its forecast for unemployment has barely changed.
Christopher, chief economist at FWDBONDS, a financial market research firm in New York. S. Rupkey told the Daily Economic News reporter that "there are signs that U.S. inflation will continue to be higher than expected. The Fed may be faster than the rate hike cycle that began at the end of 2015, because the current U.S. inflation is close to 8%, while inflation at the end of 2015 is even less than 1%. The U.S. economy is facing the risk of a sharp global economic slowdown brought by Europe. The Fed's tightening of monetary policy to curb inflation has led to an economic recession. If the U.S. economy can return from the cliff to safety in the coming months, I think it will be a miracle. ”
Daily Economic News
