Only a "deep" economic recession can solve the current inflation in the United States!

1 Just now (in the early morning of May 5, Beijing time), the Federal Reserve announced that it would increase the federal funds rate by 0.5% (that is, an increase of 50 basis points) to 0.75%~1.0% in order to reduce the high inflation rate in the United States.

The early morning rate hike was the first time since 2006 that the Federal Reserve raised interest rates twice in a row, and the magnitude of the rate hike was also the first in 22 years.

At the same time, the Fed also announced that it will launch a balance sheet reduction plan, starting in June, reducing assets and liabilities from the US$9 trillion balance sheet every month by US$47.5 billion, and three months later, it will be reduced by US$95 billion per month.

After the Federal Reserve announced a rate hike, a strange scene occurred in the capital market: the stock index, which was originally falling, only fell momentarily after the news was released, and then began to rise sharply.

As of the close, the three major U.S. stock indexes closed higher, with the Nasdaq rising 3.19%, the S&P 500 rising 2.99%, and the Dow soaring 932.27 points (up 2.81%).

The U.S. dollar index started a strong rebound under the expectation of a sharp interest rate hike. However, this rebound actually plunged during the session after the Federal Reserve officially announced a rate hike. As of press time, it fell 0.93% to 102.53.

The U.S. dollar raised interest rates and commodities rose instead of falling.

London Copper, which fell nearly 4% on Tuesday, bid farewell to its four-month trough after announcing a rate hike. International crude oil futures accelerated their rise. U.S. WTI crude oil rose by more than 5% in one day for the first time in three weeks; the New York gold futures, which had already closed down, subsequently

It turned higher and was once close to 1,900 US dollars, up more than 1% from the closing price; However, there is another driving factor for the rise in oil prices. The European Union announced a plan to gradually embargo Russian oil. According to Brother Bao’s normal understanding, raising interest rates is what the secondary market is most afraid of.

As for the Federal Reserve's sharp interest rate hike, U.S. stocks should plummet, the U.S. dollar index should rise sharply, and gold has started a downward trend. However, investment products in the capital market are now showing a completely opposite trend to the U.S. dollar's interest rate hike.

Of course, this is not "witnessing history." Such strange trends all come from this man's words: Powell made it clear that raising interest rates by 75 basis points in a single meeting is not an option that the committee is "actively considering."

Powell's words basically negated the possibility of a subsequent single 75 basis point interest rate hike.

Currently, the futures market’s pricing for the Federal Reserve to raise interest rates at the FOMC meeting on June 15 has plunged sharply. It is estimated that there is a 76.4% probability that the Federal Reserve will raise interest rates by 25 basis points at next month’s meeting, and a 23.6% probability of “holding no action”—

—The probability of raising interest rates by 75 basis points has dropped from more than 90% before the interest rate decision to 0%.

This is like the Fed hitting the market hard with a big stick, but gently saying to the market: Don't be afraid, I will never be cruel next time, and I will definitely not hit it harder than now!

Then, the market touched the body that had just been beaten and expressed that he was very happy!

I have to admire the Federal Reserve's expectation management. In just a few sentences, it has mastered the capital market.

In the A-share market, let alone raising interest rates, even if the RRR cut is less than expected, the market will be scared to death.

This may be how a "mature person" should behave.

2 The United States is beginning to taste the "evil fruits" it has sown.

Inflation in the United States has continued to rise over the past few months, with the inflation rate in March reaching as high as 8.5%. The factory price index for industrial products (PPI) rose by 11.2% year-on-year, and the PCE index (personal consumption expenditures deflator) rose by 6.6% year-on-year.

Continue to refresh the peak since 1982.

The one-time 50 basis point interest rate hike shows that the Fed has realized that it has seriously underestimated inflation for a long time.

Another negative consequence of inflation is that the consumption power of the United States has begun to decline.

Americans of all income levels are changing their spending plans due to inflation.