The Fed raised interest rates by 75 points as planned and hinted at a slowdown in rate hikes and gold prices soared by $ 15
In the New York session on Wednesday (November 3), at 2:00 am Beijing time on Thursday, the Federal Reserve announced its latest November interest rate decision. The Fed raised interest rates by 75 basis points as expected to 3.75-4.00%, in line with expectations.
Judging by the Fed’s decision statement this time around, the Fed’s wording is slightly dovish and the Fed has hinted that it may slow the pace of interest rate hikes. Following the announcement of the resolution, the spot price of gold rose a steep $ 15, the US dollar index fell 80 points, and other non-US varieties rose to varying degrees.
Among them, the euro against the US dollar has increased by more than 70 points in the short term; the pound against the US dollar rose nearly 100 points in the short term; the Australian dollar against the US dollar has risen by almost 70 points in the short term, the dollar against the yen has fallen by more than 100 points in the short term;
The three major US equity indices were up in the short term, the Dow was up 1%, the Nasdaq was up 0.35%, and the S&P 500 was up 0.6%. The 2-year and 10-year US Treasury yield curves reversed further, with a reversal range of 53.7 basis points. Following the announcement of the decision, Fed swaps showed that the likelihood of the Fed raising interest rates by 75 basis points in December dropped to the 30% level.
Figure: 5-minute spot price of gold
Graph: US dollar index 5 minutes
Chart: EUR / USD 5 minutes
Chart: USD / JPY 5 minutes
Fed hikes rates by 75 basis points as planned, policy suggests slower pace of rate hikes
In terms of monetary policy, the Federal Reserve raised the benchmark interest rate by 75 basis points to a range of 3.75% to 4.00%, which is 75 basis points of interest rate increases four consecutive times. , and raised interest rates by 375 basis points this year Increase the discount rate from 3.25% to 4.00%.
The Fed believes it should continue to raise interest rates until they reach a sufficiently restrictive level. However, it is ready to adjust monetary policy appropriately and will take into account cumulative tightening and delayed effects and will monitor economic and financial developments.
Regarding employment and inflation, the Fed said employment growth was strong and the unemployment rate remained low. Inflation remains high, partly reflecting (market) imbalances. On the growth front, the Fed sees recent indicators pointing to slow growth in spending and output. In terms of geopolitical situations, the conflict between Russia and Ukraine has brought further upward pressure on inflation, putting pressure on global economic activity.
Members unanimously agree on the interest rate decision.
Market Analysis Fed Resolution Comments
Nick Timiraos, “Fed Microphone” commenting on the Fed’s interest rate decision, pointed out that the new language in the FOMC statement indicated that interest rates would be further increased, but suggested that there may be a slight increase.
The agency commented on the Fed’s interest rate resolution that it is worth noting that the 75 basis point rate hike this time around was still unanimously approved by 12 voting committees. Let’s face it, anyone in favor of slowing the pace of aggressive rate hikes is probably asking to pay attention to the delayed effects of the policy.
Analysts Comment on Fed Rate Decision: In my opinion, the new content of the statement is dovish. The Fed’s focus on the “degree of cumulative tightening” and “the delay in the impact of monetary policy on economic activity and inflation” is the best proof of this. And we have known for some time that the Fed has pursued “sufficiently restrictive” interest rate levels.
Market analysis: where does the interpretation of the “Fed signaling that it will slow rate hikes in the future” come from? The US stock market skyrocketed after the Federal Reserve raised interest rates again by 75 basis points, suggesting that the pace of interest rate hikes will slow down in the future. The FOMC statement states that in determining the pace of future interest rate increases in the target range, the committee will take into account the cumulative tightening of monetary policy, the delay in the effects of monetary policy on economic activity and inflation, and developments. The market’s interpretation of this sentence is that the Fed is signaling that it will slow down interest rate hikes going forward.
Changes in the likelihood of future interest rate hikes before and after the Fed’s decision statement
Prior to the FOMC statement, according to CME’s “Federal Reserve Watch”: The probability that the Fed will raise interest rates to 4.00% -4.25% in December is 5.6%, the probability of raising interest rates interest rate at 4.25% -4.50% is 47.9%, and the probability of raising interest rates to 4.50% -4.75% The probability is 46.6%; the probability of raising interest rates to 4.25% -4.50% by February next year is 2.7%; the probability of raising interest rates to 4.50% -4.75% is 25.8% and the probability of raising interest rates to 4.75% -5.00% is 47.2%, the probability of raising interest rates to 5.00% -5.25% is 24.3%.
After the FOMC statement, according to CME’s “Federal Reserve Watch”: the probability that the Fed will raise interest rates to 4.00% -4.25% by December is 3.8%, the probability of raising interest rates interest rate at 4.25% -4.50% is 64.5%, and the probability of raising interest rates to 4.50% -4.75% The probability of raising interest rates to 4.25 % -4.50% by February next year is 2.3%; the probability of raising interest rates to 4.50% -4.75% is 40.8% and the probability of raising interest rates to 4.75% -5.00% is 44.5%% , the probability of raising interest rates to 5.00% -5.25% is 12.4%.
Analysts believe the US recession is inevitable
According to a recent survey by KPMG, an internationally renowned professional accounting services firm of 1,325 CEOs, 91% believe the US economy is heading for a recession. Of these, 51% said they were preparing for an economic downturn by firing workers. In a recession, new hires are one of the first targets companies target for layoffs, says the analysis. New hires tend to be younger and less experienced. The longer an employee is with the company, the more valuable they are. If the company is planning to fire people, it would prefer to fire someone who doesn’t have all of the company’s know-how.
The analysis says a US recession is “inevitable” as long as the Fed tries to bring inflation back to its 2% target. Analysts expect US inflation to drop to 3.5% -4% next year, which would give the Fed an “excuse” to suspend rate hikes. However, the Fed will continue to tighten policy for longer than expected. As inflation recedes, you may see the Fed ease the brakes, but at some point the US will slide into a recession, which is somewhat inevitable.
Many asset portfolios are built on false assumptions due to investors’ lack of experience in dealing with inflation and recessions, the analysis says. These include the idea that holding bonds will hedge equities and that private investments will outperform government stocks. After the “decade of the easiest investments”, people are becoming very complacent. In an inflationary environment, bonds and stocks will be more closely related, so bonds and stocks are not effective hedges against inflation. During a recession, private equity will be hit by corporate failures. Economic uncertainty and increased market volatility have created opportunities for active wealth management.
At 2:20 am Beijing time, spot gold was quoted at $ 1,663.33 an ounce
