[Chief Observation] Powell Put the Eagle Road Index 1000 "three lessons" of the Federal Reserve

Economic Observation Network reporter Ouyang Xiaohong

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No one expected that it seemed that it was not afraid of recession or inflation in the near future, and the U.S. stocks that almost recorded the "Red August" would have plummeted epic on August 26.

The cause of the Federal Reserve President Powell released the eagle at the annual meeting of the Global Central Bank of Jackson. On the same day, the Dows had 1,000 points, a 3%decrease; the NATO and S & P 500 closed at 12141.71 (-3.94%), 4057.66 (-3.37%).

Powell mentioned inflation 45 times in this speech with less than 1300 words and nine mentioned prices. The global market was really frightened by his "Eagle Policy and Price Stability" and 8 -minute "Eagle Policy and Price Stability". Because Powell seemed to put anti -inflation in supporting higher economic growth; emphasizing " The inflation is not rest, the interest rate hikes do not stop ", and warn that the monetary policy should not be relaxed prematurely.

"Although Powell has not forgotten the fundamental task of promoting economic growth in the Fed, it is still at the bottom of the mission list, and the market still needs to wait patiently for the real inflection point." Thomas Costerg, a senior American economist in Wealth Management of Switzerland.

Powell said that the September meeting decided to depend on the newly announced overall data and changing prospects. To some extent, as the position of monetary policy is further tightened, the pace of slow interest rate hikes may be appropriate.

But he immediately said, "Restoring price stability may need to maintain a restricted policy position for a period of time. History records strongly warn people not to relax the policy prematurely." At the July meeting, Powell once said that in us, we said that in us At the next meeting, an extremely big interest rate hike may be appropriate.

Ke Dongming believes that the July meeting seemed to marked a turning point: the Fed suddenly realized that excessive currency tightening constituted potential risks for economic growth. Nevertheless, the Federal Reserve has subsequently announced a sharp interest rate hike by 0.75%.

In his opinion, two judgments in the currency market have contradictions. On the one hand, the gentle position passed by the Federal Reserve's July meeting is only temporary: inflation is still high, employment data is still strong, and the appearance of the inflection point is too early. In fact, in the comments published by most Federal Reserve regions in August, this is the main purpose, and it will definitely affect market expectations. However, for others, the seeds of the inflection point seem to have been broadcast.

"We think that the Fed has begun to make changes, but changes will be gradual." Ke Dongming said that he explained that the most important thing is that the Fed's response function is changing, and the "leading" of the economic cycle including employment situations, including employment, The indicator, not just the "lag" indicator. In July, Powell re -proposed the concept of the "lag" effect of monetary policy on the economy. This concept will be a key theme of the Jackson Hall Global Central Bank Annual Conference. Powell should be looking forward to 2023, and he cannot ignore the market's general expected 50%risk of recession. Recently, history has shown that inflation will decline sharply after the decline.

In fact, before the Fed's next month (September 21), Powell's speech at the annual meeting of the Global Central Bank of Jackson Hall will be one of the last opportunities for the market to interpret future monetary policy directions. Yang Aozheng, chief Chinese analyst of FXTM Fulto, believes that the market currently has different interest rates for the Fed will raise interest rates 50 basis points. The interest rate futures market shows that the probability of 75 basis points to 3%-3.25%of the Federal Reserve is 58.5%.

So, what does the Fed ’s interest rate hike or 75 basis points mainly depend on?

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In fact, so far, the Fed is still having a difficult choice between inflation and stabilizing the economy. Ke Dongming also believes that at the end of the summer of this year, the US major monetary policy conference should once again face the famous dilemma: growth or inflation.

Yang Aozheng analyzed that from the perspective of economic fundamentals, the latest economic data performed poorly. The U.S. economy has been in a technical recession (negative growth for two consecutive quarters), and a number of data released recently highlights the continuous economic slowdown pressure. The PMI of the manufacturing and service industry was newly lowered in two years, both lower than the market expectations. Among them, the service industry PMI recorded 44.1 and fell below the Rongbai line. In July, the annual rate of new house sales was calculated to 511,000 units at an annual rate, and also the set rate was 511,000 units, and it was also. Lower than expected.

The economic data is weak, and the inflation pressure has been relieved (the United States CPI in July increased by 8.5%year -on -year, a fall from last month). Against this background, the market expects Powell to release pigeons signals, and the market or interpretation as the central bank will slow down and add The rhythm of interest, predicting the interest rate hike next month is 50 basis points. Special expected, this is not the case.

In fact, for the stock market, according to Yang Aozheng's observation, in the past two months, it is precisely the expectation of investors to drive the stock market to rise in the turn of monetary policy. High investment and high growth also require high financing, so it is more sensitive to interest rates). The index has rebounded by 16%from the low point of the index from mid -June.

Perhaps this also makes the stock market a secondary signal for Powell? But I do n’t know, what does the Wall Street “8.26” on the Wall Street “8.26” on the Wall Street that means the Fed?

In fact, the Federal Reserve's July Best Conference "Eagle Pigeon" has both, but the market seems to be more willing to interpret it as a pigeon position; including this Powell's speech, it is not a pigeon without a pigeon. In terms of extent, as the position of monetary policy is further tightened, the pace of slow interest rate hikes may be appropriate. " It's too early. In Ke Dongming's view, in the next few months, Powell's attitude is very ambiguous, but it may still release the signal of adjusting the interest rate hike. The Swiss Patek Wealth Management is expected to raise interest rates by 0.50%in September, and if the labor market does not immediately show signs of slowing down, the next rate hike may return to 0.75%. Since then, the Fed may slow down its interest rate hike at 0.25%.

Xiong Yuan, the chief economist of Guosheng Securities, analyzed that Powell's speech released a 4 -point signal: (1) The Fed has fully prepared for the slowdown of the economy and employment, and even "enjoy it"; 75 basis points and 50 basis points are options, and the possibility of 75 basis points is greater; (3) At present, it is too early to consider interest rate cuts;

Guosheng Securities believes that the Federal Reserve's policy position may only significantly turn in November, and the subsequent interest rate hike is more likely to be: September 75 basis points, November 50 basis points, December 25 basis points, February of next year 25 basis points Then stop raising interest rates, and the probability of interest rates will be reduced in the second half of 2023. And predicting that U.S. stocks are still in the "buying expectations" stage, and subsequent fluctuations may increase, but the risk of continuous decline in the short term is limited; the real risk lies in the "selling facts" stage after confirmation of liquidity. This situation may be possible. It will be at the end of the year or early next year.

In other words, the plunge of US stocks 8.26 may be just a small event, and the larger global market turmoil is still behind?

But seeing that Powell's speech fell, US stocks and gold continued to fall, 10 -year US debt yields fluctuated sharply, and the US dollar index continued to rise. As of the close of the day, the yield of 10 -year US bonds was basically flat at 3.04%; the US dollar index rose 0.4%to 108.8; spot gold fell 1.2%to $ 1738/ounce. CNH offshore RMB closed at 6.8944 against the US dollar, minimum 6.8980, maximum 6.8494, and the multi -air game was fierce, with an amplitude of 0.71%on the day.

The World Bank Macroeconomic, Trade and Investment Agency Global Director Marcelo Estwa, recently wrote that the US dollar has been singing up all the way. The appreciation rate has reached about 11%since the beginning of the year. On August 26, the euro was reported at 0.9964 (-0.11%), and the yen was reported to the US dollar at 137.64 (+0.85%).

Last week, a number of Federal Reserve officials made relative eagle remarks and suppressed the market's longing for slowing down. Yang Aozheng analyzed that the US dollar has risen significantly last week, and the US dollar index hovers at the high point of 108-109, and the euro/USD is again again. A new low of 20 years. Relatively speaking, the US dollar/yen seems to reflect the market that the market continues to raise interest rates on the Fed or slows down.

Marcelo Estwa believes that the main reason for the continued strengthening of the US dollar is the strong demand for the US dollar. Economic outlook shows that the growth of most economies will slow down. At the same time, the Ukrainian war caused huge geopolitical risks and market turmoil. In addition, the level of inflation at a historical high has prompted the Federal Reserve for radical interest rate hikes. These factors and other factors have prompted investors to pursue security assets. They withdrawing from Europe, emerging markets and other places, and in order to seek assets (obviously needed to be purchased with US dollars) as a shelter.

The Russian and Ukraine War triggered the preliminary appreciation of the dollar currency in emerging markets, rising greater than the appreciation of reducing panic in 2013 and over -related incidents involving oil export countries. Marcelo Estwa analysis is that the market continues to expect the Fed to increase interest rates rapidly. In the past similar situations, emerging markets have encountered crisis. For example, the "lost ten years" in Latin America in the 1980s, and the "agave wine" crisis in Mexico in the 1990s (then spread to Russia and East Asia. To.

As a result, Marcelo Estwa regards the "debt concerns+growth trouble+trade problem" as three ways to affect emerging markets. "Global inflation exceeds expectations (especially in the United States and European economies) is triggering a financing environment." Piel Olivyla Lagram, an Economic Consultant and Research Department of the International Monetary Fund (IMF) Economic Consultant and Research Department, is in IMF " In the report of the World Economic Outlook (July 2022), the growth of the world's three major economies is falling into stagnation, which has an important impact on global economic prospects. Inflation is a major problem. Since April, the global economic prospects have obviously become dim. The world may face recession quickly, and only two years have passed the last decline.

Pierre-Oliviegulan warned that the current level of inflation is obviously risky for the current and future macroeconomic stability, and lowering the inflation to the central bank's target level should become the top priority of policy makers. He explained that this is especially true for emerging market economies. Countries must properly use macro -prudential tools to maintain financial stability. If the elastic exchange rate is not enough to absorb external shocks, policy makers should be prepared to implement foreign exchange intervention or capital flow management measures when facing crisis. three

When the global economy is "trembling" because of high inflation and strong dollar, is the Fed reflect on?

Just as Powell, at the annual meeting of Jackson Hall's global central bank, admitted "there are three important lessons."

He said our review and decision of monetary policy -based on the high fluctuation inflation we learned from the high fluctuation inflation in the 1970s and the 1980s, and the inflation dynamics learned in the low -stable inflation over the past 25 years. In particular, we are taking three important lessons. The first lesson is that the central bank can and should bear the responsibility of achieving low and stable inflation. The second lesson is that the public's expectations for future inflation can play an important role in setting the inflation path. The third lesson is that you must persist until the work is completed.

Powell explained that the former Federal Reserve Chairman Paul Walker said at the peak of the 1979 inflation period that inflation promoted the inflation itself to a certain extent, so partial work with a more stable and productive economy must be to break the expectations of inflation expectations control.

Of course, Powell said that inflation has attracted almost everyone's attention, which highlights a special risk today: the longer the current round of high inflation, the greater the possibility of high inflation expectations. This reminds me of the third lesson -that is, we must persist until the work is completed. History shows that as high inflation becomes more ingrained in wages and price settings, the employment cost of reducing inflation is likely to increase with delay.

In this way, the Fed, which had misjudged the situation of inflation, seemed to be at the expense of growth to fight inflation ...

So, will the "addicts" who have been obsessed with water stimulating the economy really "detoxify"? Judging the analysis of the Federal Reserve's ambiguous Ke Dongming, in the middle period, there will be two cases:

The first is the basic situation that we pay attention to, that is, economic recession leads to a decline in inflation, and then demand declines, which is the result of energy reduction in energy. It is worth noting that 12 million barrels of oil per day in the United States have a more competitive advantage than Europe. In view of the time for the economy, the Federal Reserve is likely to start considering the suspension of interest rate hikes at the end of this year. However, it is too early to talk about interest rate cuts.

The second situation is that the Fed's trigger price and wages rose in the case of unable to control the lagging effect of inflation, so they "walked and stop" in the interest rate hike policy; The soaring situation will deteriorate every situation. In this case, the Federal Reserve must maintain flexibility. After a short period of time, it re -raised interest rates in 2023. The wages in the United States are undoubtedly rising, but at present, rising wages seem to focus on some service industries.

The last point is that because this curve inverted in the past has been regarded as a trigger point that has been regarded as recession, and the monetary policy reversal will appear. Ke Dongming explained that the Fed's superstition policy interest rate should not be increased to 10 -year interest rates. However, this threshold is likely to be across the next few weeks. However, Powell is not very worried about this, and he mentioned in his speech that the yield curve is indeed unexpected.

"We can soon know whether it is Powell's pragmatic common sense plan or superstition of history. It is a feasible economic model." Ke Dongming said.

"These (three) lessons are instructed us to use our tools to reduce inflation. We are taking powerful and rapid measures to ease demand, keep it better with supply, and maintain inflation expectations. We will continue to persist Go down until we are convinced that the work has been completed. "In a 8 -minute speech, Powell deliberately ended in this passage, showing his determination to resist inflation.

Now, if the good stock market is a secondary signal for Powell in the early stage, then the crazy stamping of Wall Street 8.26, such as "Dao Dao three months in three months, fell more than 1000 points a day, S & P and Nasdina Index, both The largest daily decline in more than two months, and the wealth of the US rich man was washed 78 billion US dollars on that day ", would it still touch Powell?

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