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Next is Powell's speech. Starting at 2:30, I will synchronize the key points. At present, the US stock market has a good upward momentum. #BTC and #ETH have all risen in part. Next, it will be handed over to Powell.
Official live broadcast address: www.federalreserve.gov/default...
My text live broadcast is below the tweet.
This tweet is sponsored by @ApeXProtocolCN|Dex With ApeX twitter.com/Phyrex_Ni/status/1...
2024/09/19 02:19 :
Based on the news release from the Federal Reserve, the key points are:
The Federal Reserve is confident that it can keep inflation under 2% and believes the risks to employment and inflation are balanced. The Federal Reserve will continue to reduce its balance sheet.
Regarding the economy, the situation is still uncertain and requires further observation.
Two key points:
1. The Federal Reserve holds U.S. Treasuries that will mature. For the principal of these maturing Treasuries, the Federal Reserve will roll them over by auctioning them off to reinvest the funds into new Treasuries. However, there is a cap of $25 billion per month on the amount that can be reinvested. Any amount above $25 billion will be auctioned off and not reinvested.
2. If the principal of maturing coupon Treasuries is less than $25 billion per month, the Federal Reserve will choose to redeem these Treasuries. Additionally, the Federal Reserve may also redeem some Treasury bills to ensure the total principal redemption reaches the $25 billion monthly cap.
The Federal Reserve also receives principal payments from its holdings of agency debt and mortgage-backed securities (MBS). If the total principal received exceeds $35 billion, the excess will be reinvested into Treasuries. This means the funds will not leave the market but will continue to be invested in the Treasury market. These Treasury reinvestments will roughly match the maturity structure of other Treasuries in the market to avoid a significant impact.
This may not be considered as "quantitative easing" because the Federal Reserve is simply rolling over maturing Treasuries and reinvesting principal payments, maintaining the existing asset size rather than injecting new liquidity. This is a neutral or "passive" liquidity management measure to maintain the current level of market funds, not a typical "quantitative easing" with more aggressive measures to expand the balance sheet or lower benchmark rates.
The opening is Powell's reading of the manuscript. The contents of the manuscript will be made public on the Federal Reserve's website, so I won't translate it. The focus is on answering reporters' questions.
The risk of inflation rising is decreasing, but the risk of employment falling is increasing.
The forecast for 2024 is 4.4%, and for 2025 it is 3.4%. This means that it is expected that the QE cycle may not begin before the end of 2025.
Inflation is falling faster than expected.
First question: Why are we considering a 50% rate cut now when we didn’t consider a 50% rate cut in July? Will there be more 50% cuts in the future? Powell’s answer: A lot of adjustments have been made since the last meeting. We have received the labor data for July and August, as well as the inflation data. These data are the main reasons for the Fed’s adjustments. Whether we will continue to cut by 50% in the future will depend on the economic development.
Second question: The dot plot shows that interest rates will remain high until next year. Are you worried about an economic recession? Powell's answer: It still depends on the economy and then decided at each meeting. Inflation is falling and the unemployment rate has risen slightly, so interest rates need to be readjusted (it seems that this question has not been answered)
The third question: Is the 50% rate cut a clear decision? Is there sufficient discussion? Powell replied: I think the decision to cut the rate by 50% is a good decision. All 19 members support the rate cut.
The fourth question: The unemployment rate has reached 4.4% at most. When the unemployment rate rises, it will always continue to rise. Does the Fed think that the unemployment rate will continue to rise? Powell answered: The US economy is very good, inflation is falling, and the labor market is very stable.
The fifth question from Nick: Given the recent substantial revisions to employment data, has today's rate cut fallen behind expectations? Will the rate cut speed accelerate?
Powell's answer: The Fed does not think it has fallen behind at the moment. Although other countries have cut rates several times, this time is good for the Fed. The Fed has waited for a long time. Considering the current basic situation, a rate cut in September is not a standard, which may make the Fed move slower, but this is normal.
The sixth problem: Not keeping up is basically an employment problem.
The seventh question: Will the labor market deteriorate? Is the 200 basis point rate cut to prevent the deterioration of the job market? Powell answered: The Fed has a strong message that inflation will fall to 2%, and this will be the case over time. If the labor market slows down, the Fed has the ability to deal with this problem.
Question 8: You think there is no shortage of jobs. Can you introduce some data that will be helpful for the discussion at this meeting? Powell replied: The current unemployment rate is very healthy, the labor force participation rate is very high, and the statistics of the aging population have been re-conducted. To a large extent, the Federal Reserve believes that the employment level can be balanced. The job vacancy data is still very strong, and the unemployment data is not high, but there is still a risk of a downward trend in employment.
The ninth question: Still about employment
Powell answered: The rise in unemployment should be caused by the slow recruitment rate. The labor market is not considered to be very tight now.
I didn't catch up. The question mainly asked whether the Federal Reserve would increase the intensity of interest rate cuts. Powell's answer was mainly to wait and see the data.
Question 11: What message does the massive interest rate cut try to convey? Powell's answer: The US economy is currently growing steadily, inflation is falling, and the job market is stable. The US economy has not seen any problems. It is recovering from high interest rates, and the Fed is now gradually controlling it. The Fed has not yet seen a path to 2% inflation, but it can achieve this path.
Question 12: Housing inflation
Powell answered: Housing inflation does exist, mainly due to high rents, but it is not outrageously high. The Fed will work hard to control the decline of inflation, including housing inflation, but this may take some time.
Question 13: Monetary policy may have a long lag period, and the current interest rate cut is far from the expectations in July. Powell's answer: The 50 basis point interest rate cut is to ensure that we do not fall behind the progress.
Question 14: I will not translate the questions related to mortgage interest rates.
Question 15: The relationship between a 25% and 50% interest rate cut. If the market is good, will the interest rate be cut by 50 basis points, or if the economy is worse, will the interest rate need to be cut by more than 50 basis points? Powell's answer: The Fed will always try to do what it should do in the current economic situation, and this is what we are doing now.
Question 16: The data on the labor market may not be reliable. Is the Fed focusing on the labor market? Powell replied: We will continue to pay attention to data including the labor market. We will look at all the data and then gradually formulate strategies. The Fed does not have a clear route in mind at present.
Question 18: Basel Accord, regarding bank regulation
Powell’s answer: Powell supports these ideas. These changes have been negotiated and put forward for comments. We will listen to the opinions of all parties.
The last question: Today's decision reflects the adjustment of the labor market. The labor market is currently stable, but is the Fed worried about the deterioration of the labor market?
Powell replied: Now we are roughly balanced. If we look back over a long period of time, we can see the risk of inflation and labor tension, and there is a serious labor shortage. The current labor market is very stable, and inflation expectations are higher than the target, so for the Fed, it is more concerned about the rise in inflation. The Fed has been doing this for a long time and will continue to do so. The goal set 14 months ago was to reduce inflation, but the reduction in inflation has cooled the job market, so it is time to start cutting interest rates.
Powell believes that the labor market will remain stable after the interest rate cut.
Finish
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Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
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