It's a bit late to clock in today, so let's talk about last night's meeting first.
It's much better than the phenomenon. Through the questions, we can see that the market is most concerned not about when the Fed will cut interest rates, and how many times it will cut interest rates, but whether the Fed will raise interest rates. Powell's answer to this is very direct. Even if inflation (core PCE) returns to 3%, it is currently 2.8%, and the Fed has no intention of continuing to raise interest rates, at least for now. For the Fed, the current interest rate is restrictive enough.
Then his answer to the interest rate cut is based on the data each time, and he did not hold a negative attitude towards the possibility of three interest rate cuts in the March dot plot. Then Powell said that the focus of the Fed now is the unemployment rate. If the unemployment rate rises to more than 4%, it is now 3.8%, then the Fed may rebalance and consider whether to enter a defensive interest rate cut.
Too high an unemployment rate is very unfriendly to the Democratic Party. If you can see a 4% unemployment rate before the election, then there will be a new release of money. The data determines the trend of each step of the Fed, but also denies the Fed's interference in the global economy, especially Japan.
Powell did not want to discuss the expectation of rate cuts too much in this meeting. Let's pay more attention to unemployment rate and pec in the future. The speculation of rate cuts will be postponed.
Changes in Fed liquidity: balance sheet reduction -> balance sheet reduction (QT) halved -> balance sheet reduction (QT) stopped -> start easing (QE) Analogous to the trend of the big pie: decline -> stop falling -> sideways -> start rising
For the trend, rate hikes mean the beginning of bad news, suspension of rate hikes indicates good expectations, rate cuts begin to bring damage, and liquidity increases after rate cuts. This is a big trend. There may be different structures in the middle, but the results are often inevitable, so there is nothing wrong. Everything is the interpretation of historical laws. The difference is that the scripts are different, but the endings are the same.