At 2: 00 a.m. Beijing time on September 22nd, the Federal Reserve officially announced that it would raise the target range of the federal funds interest rate from 2.25% to 2.5% to 3% to 3.25%, and raise interest rates by 75 basis points again. So today, Bian Xiao is here to sort out the Fed's interest rate hike. Let's have a look!
The Federal Reserve raised interest rates by 75 basis points.
The Federal Reserve's meeting on interest rates in September and Powell's latest statement have once again become the focus of global market attention.
At 2: 00 a.m. Beijing time on September 22nd, the Federal Reserve announced that it would raise the target range of the federal funds rate from 2.25% to 2.5% to 3% to 3.25%, raising interest rates by 75 basis points. So far, the Federal Reserve has raised interest rates for five consecutive monetary policy meetings and 75 basis points for the third time in a row.
At the same time, the Federal Reserve announced that it would raise the upper limit of the federal funds interest rate range-the excess reserve interest rate (excess reserve interest rate) by 75 basis points, from 2.4% to 3. 15%. In addition, this interest rate hike decision was supported by all FOMC voting members.
Looking back at the pace of the Fed's interest rate hike, it is not radical. Since the beginning of this year, the "ridiculously high" inflation in the United States has not stopped, which has made the Fed raise interest rates and act more aggressively. It raised interest rates by 25 basis points in March, 50 basis points in May and 75 basis points in June, July and September. This is a fierce interest rate hike that has never happened since Paul Volcker, former chairman of the Federal Reserve, fought inflation in the 1980s.
In fact, the market is ready for the expectation of raising interest rates in September. Before the announcement of the Fed's interest rate decision, the "mouthpiece" of the Fed and the Wall Street Journal bluntly said that the Fed would raise interest rates by at least 75 basis points this week, and the CPI data destroyed the hope of the Fed to slow down the rate hike.
The market also holds a similar attitude. According to the latest issue of CME Fed Watch, the probability of the Fed raising interest rates by 75 basis points in September is 82%, and the probability of raising interest rates by 100 basis points is only 18%.
From this point of view, the Fed's interest rate hike of 75 basis points is almost completely in the market expectation. At present, the global market is more concerned about whether the interest rate hike in September will become the "watershed" of the Fed's interest rate hike cycle.
At 2: 30 in the morning, Powell delivered a signal at a regular press conference. Powell said that the future rate hike time will depend on the future data, and the rate hike time may be slowed down at some point to assess the impact of the rate hike/austerity policy.
After Powell's voice landed, the US stock market once ushered in a strong rebound, but after the press conference, the three major indexes of the US stock market suddenly plummeted, and the Dow Jones index plummeted from the highest point to more than 837 points. At the close, Nasdaq fell 1.79%, S&P fell 1.7 1%, and Dow fell 522.45 points, or 1.7%, the lowest since June 17.
Star technology stocks plummeted across the board, with Amazon down nearly 3%, Netflix, Apple, Tesla and Metaplatform down more than 2%, Google down 1.84% and Microsoft down 1.44%.
Popular China stocks also fell collectively, with Nasdaq Golden Dragon Index falling by 5.9%, Tencent Music and Futu Holdings falling by more than 6%, Pinduoduo, Baidu, JD.COM and Netease falling by more than 5%, Alibaba, iQiyi and Daily Youxian falling by more than 4%, and Billie Billie falling by more than 2%.
The resolution statement issued by the Federal Reserve that night emphasized that the Federal Reserve Committee will continue to reiterate its commitment to bring inflation back to the target level and will continue to raise interest rates in the future.
For overseas markets, the Fed will raise interest rates by 75 basis points again, which may further aggravate the risk of capital outflow and currency depreciation. Some analysts pointed out that with the narrowing of the spread with the United States, the net outflow of funds from emerging markets such as Thailand, Indonesia and Malaysia will intensify.
According to the latest exchange data compiled by the industry, as of the week of September 16, foreign investors have withdrawn from Asian emerging market stocks outside China for the fourth consecutive week, and the total capital outflow of Asian emerging market stocks outside China has reached about $64 billion this year.
The "interest rate hike storm" may continue.
Obviously, the market has fully expected to raise interest rates by 75 basis points in September, and the market is more worried about the Fed's future interest rate hike path.
The answer to this question may be found in the latest interest rate bitmap disclosed by the Federal Reserve.
Compared with the interest rate bitmap released in June this year, the current expectations of Fed officials to raise interest rates are significantly stronger.
The latest interest rate bitmap shows that all 1 8 Fed officials except1expect that by the end of 2022, the policy interest rate federal funds rate will rise above 4%, among which 9 people expect it to be between 4.25% and 4.5%, and one even predicts that the interest rate will exceed 4.5% by then. In June this year, everyone expects it to rise above 3%, and no one expects it to exceed 4%.
4.25% to 4.5% is the interest rate range that most people estimate. In other words, by the end of this year, the Federal Reserve will raise interest rates by 1.25 basis points, leaving only two monetary policy meetings as planned this year.
In this regard, some analysts believe that at the next Fed meeting held in June 165438+ 10 before the mid-term congressional elections, it may be decided to raise interest rates by 75 basis points, putting the possibility of raising interest rates for the fourth time in a row on the table.
At the same time, the latest report released by Goldman Sachs this week also predicts that by the end of 2022, the target range of the federal funds rate will reach 4%-4.25%. This indicates that after the Fed raises interest rates by 75 basis points this time, the remaining two meetings in the year will raise interest rates by 100 basis points in total.
DominicWilson, an analyst at Goldman Sachs, said that if the Fed needs to see a higher unemployment rate to determine that US inflation will fall, the S&P 500 index may further fall to 2900-3375, and the yield of five-year US bonds may climb to the range of 4.5-5.4%.
Deutsche Bank, one of the most pessimistic investment banks on Wall Street, warned that the Federal Reserve may raise interest rates to 4.9% before the first quarter of 2023 to fight inflation.
Powell said that he would not consider selling mortgage-backed securities (MBS) in the Fed's balance sheet quickly.
However, many people in the industry pointed out that the Fed doubled its interest rate as planned this month to speed up the pace of reducing its balance sheet, and the tightening of monetary policy under the combination of "raising interest rate+shrinking balance sheet" itself is rare in recent decades.
IanLyngen, head of US interest rate strategy at BMOCapitalMarkets, estimates that by the end of 2023 alone, the scale effect of quantitative austerity can even rival that of raising interest rates by 75 basis points.
SolomonTadesse, head of quantitative strategy in North America at Societe Generale, believes that the Fed will eventually cut its balance sheet by $3.9 trillion, equivalent to an implicit rate hike of about 450 basis points.
The gloom of American economic recession
The importance of the just-concluded meeting is self-evident. The ridiculously high inflation, the job market and the risk of economic recession are all key points that the Fed needs to make every effort to weigh.
The quarterly economic outlook report just released by the Federal Reserve has clearly stated the above three aspects.
First, in its latest quarterly economic outlook (SEP) report, the Federal Reserve lowered its GDP growth forecast for the next three years. Among them, the real GDP growth rate of the United States in 2022 is expected to be greatly reduced from 1.7% in June to 0.2%, but it is still expected to achieve the growth rate of 1.2% in 2023.
Secondly, the Federal Reserve raised its unemployment rate forecast from 3.7% to 3.8% in 2022, from 3.9% to 4.4% in 2023 and from 4. 1% to 4.4% in 2024.
The industry believes that the Fed's upward adjustment of the unemployment rate forecast may further trigger market concerns about the US economic recession. This will mark a major shift in the collective attitude of Fed officials.
In addition, the statement of this Fed meeting continued to emphasize that in the Russian-Ukrainian conflict, "related events are putting new upward pressure on inflation and putting pressure on economic activities".
Finally, back to the American stock market, from the historical data, the last ten days of September is almost one of the most difficult periods in the American stock market, and 10 is the month with the biggest fluctuation in the stock market. According to the data of investment research company CFRA, since World War II, the average volatility of 10 month is 36% higher than that of other 1 10 months in a year. One reason is that the market often gets into trouble before the mid-term elections.
In addition to the Fed meeting, US stocks will also be affected by the third quarter earnings report 10. Strategists at Morgan Stanley and Bank of America warned that earnings expectations need to be further lowered before the stock market finds a real low.
NigelBolton, co-chief investment officer of BlackRock, the world's largest asset management giant, also expressed pessimistic expectations. He believes that the next challenge that stock traders will face is the decline in profits of listed companies in the US stock market.
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