The US consumer price index (CPI) announced last weekincreased by 3.5% year- on-year in March, which was higher than expected. The March retail sales released on the 15th also increased by 0.7% compared with February, which was also higher than market expectations.
Against the backdrop of continued strong economic growth and stagnant progress in combating inflation, Chairman Jerome Powell delivered a speech earlier today (17th) Taiwan time, acknowledging that recent data showed a lack of progress in combating inflation and had not brought any benefits. There is enough confidence to suggest that the timing of the rate cut may be postponed to a later date.
Given the strength of the labor market and the progress made so far in inflation, it may be appropriate to allow more time for high interest rate policies to continue to work, and the current policy stance is well positioned to manage risks.
Fed officials change attitude
Originally, in early March, Powell and Fed officials believed it would be appropriate to cut interest rates later this year, and expected to cut interest rates two or three times. However, as a number of inflation data once again exceeded expectations, many officials from the Federal Reserve also spoke out one after another, emphasizing that the direction of monetary policy depends on economic data, and emphasized that there is no rush to cut interest rates.
Wall Street analysts have also successively revised their forecasts for interest rate cuts, predicting that there will only be one or two rate cuts this year, and that the first rate cut will be later than previously expected. Wall Street Journal reporter Nick Timiraos, known as the "Fed's mouthpiece," also wrote that from Ball's latest remarks, it can be seen that the development of the Federal Reserve's monetary policy has undergone a significant change, breaking the Fed's possibility of cutting interest rates. expect.
According to CME Group's FedWatch tool , the market currently estimates that the probability of a rate cut in June is only about 15%, the probability of keeping interest rates unchanged is close to 85%, and the probability of a rate cut in July is not more than 40%.
UBS worries Fed will continue to raise interest rates
Even more radically, UBS strategists warned yesterday (16th) that various data have increased the possibility that the Federal Reserve will raise interest rates instead of cutting them, and interest rates may rise to a maximum of 6.5% next year.
If U.S. economic growth remains resilient and the inflation rate remains at 2.5% or higher, the Federal Reserve will raise interest rates again before the beginning of next year, and the federal funds rate will reach 6.5% by the middle of next year. This risk is real.
UBS has lowered its expected rate cut by the Federal Reserve this year from 275 basis points (11 basis points) to just 50 basis points (2 basis points). UBS warned that if the U.S. economy does not land and triggers further interest rate increases, U.S. Treasury yields will As the curve flattens and benchmark yields rise sharply, the stock market may fall by 10% to 15%.
Performance of the four major U.S. stock indexes on the 16th:
Perhaps because the market has already digested expectations that the Federal Reserve may delay an interest rate cut, the four major U.S. stock indexes did not close with particularly large fluctuations, and the Dow Jones and the Federal Reserve also closed higher.
- The Dow Jones Industrial Average rose 63.86 points, or 0.17%, to close at 37,798.97 points.
- The S&P 500 fell 10.41 points, or -0.21%, to close at 5,051.41 points.
- The Nasdaq Composite Index fell 19.77 points, or –0.12%, to close at 15,865.25 points.
- The Philadelphia Semiconductor Index rose 41.43 points, or 0.89%, to close at 4,720.53 points.
Bitcoin regains footing, hits 64,000
In the cryptocurrency market, Bitcoin reached a low of $61,688 before Ball's speech, and then continued to fluctuate higher, reaching a maximum of $64,376 near six o'clock this morning. It was trading at US$63,768 as of press time, up 0.42% in the past 24 hours.
The trend of Ethereum is similar to that of Bitcoin, reaching a maximum of US$3,119 in the morning and trading at US$3,089 at the time of writing.
CoinMarkeCap data shows that yesterday’s losses in the other top ten currencies also converged.
