Control inflation expectations: Although interest rate hikes do not directly "eliminate" liquidity, they can theoretically curb consumer and corporate spending by raising borrowing costs, thereby reducing aggregate demand and controlling price pressure. In this way, the Fed hopes to convey to the market its determination to fight inflation and stabilize inflation expectations.

  1. Asset bubble management: A high interest rate environment helps to squeeze asset bubbles, especially in the stock market and real estate market. These markets have accumulated a lot of bubbles in the past few years due to the low interest rate environment. The Fed hopes to gradually release these bubbles by raising interest rates to avoid more serious economic turmoil in the future.

  2. Debt sustainability: For the U.S. government and its massive debt burden, higher interest rates mean higher debt costs. However, in the long run, the Fed may believe that restoring fiscal discipline through rate hikes will help enhance debt sustainability and reserve policy space for possible future crises.

What really determines whether the Fed will cut interest rates

  1. Economic data: Although you mentioned that employment data may be questioned, the Fed will still comprehensively consider a number of economic indicators including employment, inflation, GDP growth, etc. when making decisions. The Fed might consider cutting interest rates only if these data show a clear slowdown in the economy or a significant reduction in inflationary pressures.

  2. Financial market stability: Financial market stability is also an important factor in the Fed's decision-making. If a high interest rate environment leads to sharp fluctuations in financial markets or credit tightening, the Fed may adjust its monetary policy to maintain market stability.

  3. Global economic situation: In the context of global economic integration, the Fed's monetary policy will also be affected by the global economic situation. For example, if the global economy generally falls into recession, the Fed may consider cutting interest rates to stimulate the domestic economy and promote international trade.

An effective way to curb inflation

  1. Currency evaporation: As you mentioned, evaporating excess money by driving up the price of US dollar assets or triggering an economic recession are two extreme means of curbing inflation. However, these methods are accompanied by huge economic and social costs, so the Fed will be very cautious when taking these measures.

  2. Structural reform: To fundamentally solve the inflation problem, structural reform is also needed, including improving labor productivity, optimizing industrial structure, strengthening supervision, etc. Although these measures are slow to take effect, they can fundamentally enhance the resilience and stability of the economy.

In summary, the Fed's decision to maintain high interest rates is based on complex considerations of the current economic situation and future expectations. The factors that really determine the Fed's interest rate cuts include economic data, financial market stability, and the global economic situation. In terms of curbing inflation, in addition to monetary policy, long-term measures such as structural reforms are also needed to deal with it together. #美国首次申领失业救济人数超出预期 #非农就业数据即将公布 #Mt.Gox将启动偿还计划 $ETH $BTC $BNB