In the early morning of March 23, Federal Reserve Chairman Powell announced under pressure that he would still raise interest rates by 25 basis points. Although Goldman Sachs predicted that the outcome of "no interest rate hike" would fail, the result was roughly the same as previous market expectations. However, Powell's frequent surprises in subsequent speeches and question-and-answer sessions made it impossible for the market to continue to define his remarks as "dovish", and Bitcoin fell by more than 5% in response. BlockBeats organized its main remarks and compiled them as follows:
TL;DR
· The Fed sees higher rates and slower growth weighing on businesses
· Acknowledgment that turmoil in the banking sector will affect economic and policy decisions
· Considered no rate hike, but strong support for hike decision
· Participants see no rate cut this year
· The balance sheet boost from the emergency lending program reflects only the short term and has nothing to do with monetary policy
The following is the original text of the remarks (in chronological order)
Acknowledgment of high interest rates and tight credit environment
“Higher interest rates and slower growth are weighing on businesses, and virtually all members of the FOMC see risks to growth tilted primarily to the downside. Inflation expectations appear well contained for now.”
“The Fed is continuing to shrink its balance sheet significantly, but we believe that recent banking events will lead to tighter credit conditions, which will affect the economy and the response we need to make. Recent economic indicators have been stronger than expected, and we will use this Decisions are made on a meeting-by-meeting basis, closely monitoring incoming data and the actual and expected impact of tighter credit conditions as a basis for decision-making."
"A small number of banks have experienced serious difficulties, and the Fed, Treasury, and FDIC have acted decisively earlier. Depositors' savings are safe, and the Fed's lending programs have effectively met banks' needs and demonstrated ample Liquidity is available. We will also learn from this incident and will continue to monitor the situation closely, ready to use all tools to ensure the safety and soundness of the banking system.”
Response to rumors of "no rate hike" and "rate cut"
“The Fed considered a pause (in raising rates), but there is strong consensus support for a rate hike. The need for further rate hikes will be based on the actual and expected impact of the credit crunch, with the banking crisis likely to have only a modest impact.”
“Participants believed there would be no rate cuts this year, SVB’s bankruptcy was an exception, and that there was no widespread weakness in the banking system. A rate cut this year was not our base case. At the end of the day, we will have done enough to bring inflation down to 2%; tighter favorable credit conditions as an alternative to raising interest rates.”
"If we need to raise rates higher, we will. We are not thinking about insuring all unprotected bank deposits."
“The recent Liquidity, while adding to our balance sheet, has a different intent and impact, the balance sheet expansion reflects short-term lending, and the recent balance sheet expansion has nothing to do with monetary policy.”
