Source: Dongzheng Derivatives Research Institute
Report Summary
Trend Rating: US dollar: bullish
Report date: September 22, 2022
★ FOMC September interest rate meeting, continue the hawkish statement:
The Federal Reserve's September FOMC interest rate meeting was held, and the Federal Reserve raised interest rates by 75 basis points, basically in line with market expectations. Powell stated that the Fed will continue to maintain interest rate hikes to fight inflation, reflecting hawkish signals, so the market's risk appetite has weakened.
Looking at the September interest rate meeting. The Federal Reserve believes that the economy is growing moderately, the job market is strong, and the unemployment rate remains low. Inflation remains high, reflecting the imbalance of supply and demand related to the epidemic, and the rise in food and energy remains wider price pressure. The Federal Reserve's view on the economy is not much different from before. Its view on economic growth marginally rebounded, mainly because the unemployment rate is at a low level. The strong labor market provides conditions for accelerating interest rate hikes.
Judging from Powell's statement at the press conference, Powell maintained his attitude since the central bank's annual meeting and continued to maintain high pressure on the policy rhythm. Especially the priority of solving high inflation is obviously above other issues, which means that the weakening or even continuous weakening of short-term economic data has little impact on the policy rhythm. Therefore, in terms of high-pressure policy expectations, the probability of a future US economic recession has increased significantly, and the possibility of a soft landing of the US economy is very low.
Overall, the interest rate meeting in September continued to remain hawkish. The Federal Reserve did not reveal any signs of a policy turning point, so the accelerated interest rate hike stage continued, and the level of policy interest rates increased significantly. For the market, high policy interest rates and the expectation of an accelerated economic weakening in the future will continue to suppress risk appetite. The US dollar index continues to strengthen, but the US Treasury yield curve is expected to be further flattened due to the rise in recession risk.
★Investment advice:
In this case, we believe that the US dollar index will continue to strengthen in the short term.
★Risk warning:
The accelerated weakening of the US economy affects the Fed's policy rhythm.
full text of the report
1 FOMC September interest rate meeting, continuing hawkish statements
Specific policy actions, the Federal Reserve raised interest rates by 75 basis points, in line with market expectations. Against the backdrop of inflation data exceeding expectations, the Federal Reserve raised interest rates by 75 basis points instead of 100 basis points, mainly without expecting expectations to be uncontrollable. The 75 basis points rate hike exceeded the normal level, which is sufficient for suppressing inflation.
For economic forecasts, the Federal Reserve has lowered its economic growth rate, expected a slight increase in unemployment rate, and also raised the level of policy interest rates. This shows that the Federal Reserve's confidence in future economic growth has begun to decrease significantly, but there is no judgment on a hard landing. The uncertainty about the forecast of unemployment rate has increased significantly, indicating that the Fed is actually inadequate for the forward confidence. The interest rate dot matrix chart shows that the reference value of forward interest rate prediction is not high for the consistency of the policy interest rate center upward. What can be judged at the moment is that the Federal Reserve will raise interest rates to above 4% this year, which will be a very high level of policy interest rate.
There are several key points at Powell's press conference, 1) The Federal Reserve identified a commitment to stabilize the inflation expectations of 2%, which is affordable compared to the pain of high inflation, higher unemployment and interest rates, and slow economic growth. 2) Rate hikes may slow down at some point in the future, but historical experience shows that ahead of schedule rate cuts need to be vigilant. 3) No one knows whether the process of tightening liquidity will cause a U.S. recession.
2 Investment advice
In this case, we believe that the US dollar index will continue to strengthen in the short term.
3 Risk warning
The US economy accelerates to weaken and affects the Fed's policy rhythm.
This article is from the financial industry
