At present, it is widely expected that the Federal Reserve will decide to raise interest rates by 25 basis points at this meeting. This means that the Fed will begin to enter a new cycle of raising interest rates. Moreover, as the Fed tries to control the CPI index and PPI index, which hit a 40-year traumatic high, this rate hike will be the prelude to the subsequent rate hike.
Other major central banks in the world will also follow the pace of the Fed. Prior to this, the central banks of Britain and New Zealand had raised interest rates one or more times in advance.
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The first rate hike since 20 18.
Earlier, at this week's meeting, the Federal Reserve made it clear that it intends to raise the federal funds rate by 25 basis points, and said that the balance sheet reduction should begin in the middle of the year. Since then, the Federal Reserve is expected to raise interest rates by 25 basis points this week, making it the first tightening policy since 20 18.
According to the CME FedWatch tool on March 15, at present, the probability that the market expects the Fed to raise interest rates by 25 basis points at the March meeting (that is, to raise interest rates to the range of 0.25%-0.5%) is as high as 98.3%, and the probability that it expects to raise interest rates by 50 basis points is 1.7%. It is estimated that the probability of raising interest rates by 25 basis points (i.e. to the range of 0.5%-0.75%) and 50 basis points (i.e. to the range of 0.75%- 1%) at the meeting in May is 46.4%, and 52.7%.
Affected by the expected interest rate hike, the market began to digest this week's interest rate hike. On Tuesday, US stocks rebounded across the board, and the S&P 500 index ended its five-day losing streak. At the close, the Dow rose 599. 1 point, or 1.8%, to 33,544.3 points. The S&P 500 index rebounded 89.3 points or 2. 1% to 4262.5 points; The Nasdaq closed at 12948.6, up 367.4 points or 2.9%.
International oil prices plummeted for two consecutive days. On Tuesday, WTI crude oil futures plunged 8.6% to around $94/barrel. At the same time, Brent crude oil futures fell more than 8% and fell below the 100 mark, down nearly $40 from last week's high of 139 USD/barrel. The day before, both kinds of oil fell by more than half.
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Highlights of this meeting: interest rate bitmap and table reduction guide
If the policy maker's forecast of the federal funds rate exceeds the neutral level of 2.5%, it means that FOMC's mood has changed, and its members may think it is necessary to restrain the US economy in the end to get the price back on track. As of 65438+February last year, most Fed policymakers predicted that by the end of 2024, the federal funds rate would only need to rise to 2. 10%.
Another highlight is the "table reduction" guide. At the meeting in June, 5438+February last year, the Federal Reserve decided to speed up the taper (reducing the purchase of bonds) and increase the monthly scale of reducing the purchase of assets from the previous $654.38+05 billion to $30 billion, that is, reducing the purchase of $20 billion of US Treasury bonds and $654.38+00 billion of mortgage-backed securities.
On March 2 this year, when Powell attended the congressional hearing, he made it clear that the balance sheet reduction would be carried out after the interest rate hike began, and he planned to normalize the balance sheet within three years. Powell hinted that he would speed up the process of "balance sheet reduction" and reduce the size of the Fed's balance sheet "in a predictable way", and said that he "hopes to make progress in the plan to reduce the balance sheet in March".
The market had expected the Fed to start shrinking its table in the third quarter, but it did not rule out the suggestion that the meeting would advance the table shrinking to the end of the second quarter. In the last round of contraction from 20 17 to 19, the Fed adopted a passive way of not continuing to work. This time, because the economic performance is too strong, it is not ruled out that the Fed will take the initiative to sell bonds, such as selling MBS.