The Fed has been stubborn and refused to release money, and it has to endure.
Now the crypto market is counting on two points: the Fed's release of money at the macroeconomic level; the emergence of a substantial ecosystem in the industry, ending the continuous lifting of restrictions on the liquidity harvesting by PVP and VC of meme coins. But obviously, neither has been implemented. The large-scale hype of meme coins has ended. Only the new memes on Ethereum and Sui are still a little hot, so the market seems extremely boring and stagnant.
After the Fed cut interest rates by 50 basis points in September, the market generally believed that the Fed would continue to cut interest rates significantly in the future. After all, inflation has fallen, but economic pressure is increasing. Taking advantage of this opportunity, China also launched a massive rescue of the market, and the stock market soared.
But taking advantage of the Chinese National Day holiday, the market was empty of the joy after the holiday. Powell made a speech denying that the 50bp interest rate cut would become the norm and would not cut interest rates too quickly; the non-agricultural data in September exceeded 250,000, far exceeding the expected 140,000. The data was very good, and the necessity of a substantial interest rate cut was reduced.
Subsequently, the market's probability of a 50 basis point rate cut in November by the Fed was reduced to 0, and the probability of a 25 basis point rate cut was also declining. On October 10, the Fed announced the key points of its September meeting: officials agreed that the larger rate cuts adopted at the meeting should not be seen as a signal of concern about the economic outlook, nor should they be seen as a signal that the Fed is ready to cut rates quickly.
Officials who commented on the degree of restrictiveness of monetary policy believed that monetary policy is restrictive, and participants also emphasized that it is important to communicate. The importance of communication lies in clearly conveying that the committee's monetary policy decisions depend on the evolution of the economy and its impact on the economic outlook and the balance of risks, so this is not a preset route. In addition, some participants said that the Fed's process of shrinking its balance sheet may continue for some time.
In other words, the Fed believes that the US economy is still strong, and even if the interest rate is cut sharply, it is not because of economic concerns, and the balance sheet shrinkage will continue. During this period, the US dollar has strengthened again, gold has fallen, the yen has fallen, and US bonds have fallen again. In particular, the long-term US bond yields have risen and re-stood at 4%, which shows that the capital game will not cut interest rates so quickly.
