12/15 03:00 The Federal Reserve announces its interest rate decision, policy statement and economic forecasts
03:30 Speech by Federal Reserve Chairman Powell
The CPI released last night exceeded expectations and reached 7.1%, which means that inflation has been further controlled and the turning point may come. At present, the interest rate hike tomorrow has been confirmed to be 50 basis points. Now the core is actually the terminal interest rate, whether the interest rate will be raised by 25 or 50 in February, and when to cut interest rates. Currently, the Federal Reserve is divided into two factions:
The dovish camp believes that high inflation is likely to continue to slow and wants to minimize potential job losses caused by high interest rates suppressing economic activity.
The hawkish camp would prefer tougher measures to fight inflation because they believe inflation could stabilize at levels above the Fed's 2% inflation target, which is unacceptable.
Now we just have to wait and see what choice Bob will make in his final speech tomorrow morning, whether he will be dovish or hawkish.
Powell is currently focusing on three categories of inflation trends. First, prices of goods such as used cars, which have been rising in the past two years, are now slowing down significantly.
Second, rents and other measures of housing costs are still rising rapidly, but the pace of increases is expected to slow next year.
Third, the prices of services other than housing mainly reflect the labor costs of enterprises.
Labor costs are the most important of these three categories.
Now that the labor market and consumer are showing significant momentum, and income growth will sustain stronger consumer spending, keeping inflation above the 2% target, that could mean the Fed keeps interest rates higher for longer than many investors expect.
Another point is that if a signal of further slowdown or a possible end to rate hikes is sent, it will cause a market rally that lowers borrowing costs, thereby stimulating rather than cooling economic activity and price increases. The Fed is raising rates to slow economic growth by tightening financial conditions - such as higher borrowing costs, lower stock prices and a stronger dollar - in an effort to better control inflation.
All of this depends on how Bob chooses. If he is dovish or sends a signal of slowing down or stopping the rate hike, the market will continue to rebound. If he is hawkish, then we must be prepared. Simply put, dovishness is good for the present, and hawkishness is good for the future.
