Tonight, investors will turn their attention to September Consumer Price Index (CPI), which will become the reference data that needs to be considered before the Federal Reserve 11 meeting. Currently, the market expects that the US CPI will grow by more than 8% for the eighth consecutive month. Considering the pressure of price increase in projects such as housing costs and medical expenses, the growth rate of core CPI will reach 6.5%.
For US stock , the latest data may mean a huge shock in the market.
JPMorgan analysts expect stocks to fall 5% on Thursday if the overall CPI data is higher than 8.3% in August. If the results are consistent with the consensus, S&P 500 will fall by about 2%. Any slowdown in inflation below 7.9% will trigger a rebound in stocks, with the index likely to rise at least 2%.
At present, the market expects Fed rate hike to continue to rise. According to the CME FedWatch tool, the probability of the Fed hike for the fourth consecutive hike hike hike for the fourth consecutive hike in November is close to 85%, and the Fed will also increase the federal funds interest rate target to at least 4.5% to 4.75%.
In the early morning of Thursday, Beijing time, the Federal Reserve released the minutes of the September meeting policy meeting. minutes show that Fed officials were surprised by inflation and expected to maintain higher interest rates until prices fell. At the same time, some participants also paid attention to the risks of the impact of policies on the economy. After the announcement, the US stock market rose and fell back to in the short term, and the yield of US bonds swayed and fell, and the US dollar index remained fluctuating around the 113 mark.
The Federal Reserve reiterated its determination to reduce inflation
In the face of inflationary pressure, the Federal Reserve raised interest rates for the third consecutive month by 75 basis points, bringing the federal funds rate range to 3%-3.25%, the highest level since 2008.
minutes showed that participants believed that FAP needed to turn to and maintain a stricter policy stance to meet policy goals that promote maximum employment and price stability.
Most participants said that although some interest rate-sensitive expenditure categories, such as housing and commercial fixed investment, have begun to respond to tightening financial conditions, a considerable proportion of economic activities have not shown much reaction yet.
price risks are still prominent. As the Fed's first inflation indicator, the personal consumption expenditure price index (PCE) in August increased by 26.2% year-on-year. Although it fell from its high this year, it is far higher than the long-term target of 2%. "Participants noted that inflation remains unacceptably high and have not responded significantly to austerity policies."
participants noted that as inflation showed little signs of slowing down so far, they improved their assessment of the federal funds rate path that might be needed to achieve the target. Most people believe that suppressing inflation is crucial, even if it means keeping interest rates high for a longer period of time. "Many participants stressed that the economic cost of taking too little action to reduce inflation may exceed the cost of excessive tightening."
However, financial market turmoil has also attracted attention. Some participants pointed out that, especially in the current highly uncertain global economic and financial environment, it is important to adjust the pace of further austerity policies to mitigate the risk of significant adverse impacts on the economic outlook.
The Fed believes that inflation is driven by supply chain problems, which are not limited to commodities, but also labor shortages. However, officials also expressed optimism that policies will help relax the labor market and lower prices. "The participants judged that inflationary pressure will gradually fade in the next few years." Some members of
believe that the rate hike will at least slow down in the next rate, but no specific time frame was given. “At some point, while assessing the impact of cumulative policy adjustments on economic activity and inflation, there may be evidence of ‘convincing’ price declines, and it will be appropriate to slow down policy rates. As policies enter restrictive areas, risks will become more bidirectional, reflecting the emergence of downside risks, i.e. cumulative constraints on aggregate demand will exceed the levels required to restore inflation to 2%."
Short-term policy stance is difficult to turn to
Since October, the risk of recession brought about by poor economic data has once heated up expectations that the Fed's interest rate hike cycle may turn early. However, the latest statements of Fed officials have not shown any wavering. Even when facing the risks of rising unemployment and pressure on the economy and financial markets, they are determined to slow down the pace of price increases.
Bob, senior economist at the Oxford Economic Research Institute Schwartz previously said in an interview with First Financial reporter that inflation continues to erode purchasing power. Although consumers are still supporting the economy, it is obvious that people are increasingly relying on savings and credit cards to spend, and wage growth cannot keep up with the pace of inflation. The longer this situation lasts, the worse the household financial situation deteriorates. The Federal Reserve still has a strong motivation to continue hike interest rates until the rising trend of prices is broken.
In combination with the minutes of the meeting, many officials' positions are a continuation of policy discussions last month. Cleveland Fed Chairman Loretta Mester said this week that the Federal Reserve cannot be complacent and still needs to continue to raise interest rates as it strives to fight the worst inflation in decades. "The tightening is too small, allowing extremely high inflation to continue to exist and embed in the economy will bring greater risks. "
In contrast, the focus on potential risks in Fed Vice Chairman Brainard's speech this week provides the possibility of changes in the path to raise interest rates next. She believes that monetary policy needs to maintain a restrictive level for a period of time to fully reflect its impact on demand and inflation. The global economic uncertainty remains high, and the probability of a sharp change in risk sentiment may intensify, especially considering the fragility of liquidity in core financial markets. "The actual policy path will depend on the data and is also based on expectations for economic development ." Things may change. ”
