Although there are only a few days left until the Federal Reserve’s September interest rate meeting, I still can’t help but make some predictions.
Market feedback is almost 100% that the Federal Reserve will cut interest rates in September.
The reasons are all kinds of weird. They say that if the interest rate is not lowered, the US will not be able to survive. If the interest rate is not lowered, Harris will not be elected. If the interest rate is not lowered, the US banks will not be able to survive. If the interest rate is not lowered, the US debt will not be repaid at all.
These reasons are all valid. But do they have anything to do with September?
The United States will have a lot of problems if it doesn't cut interest rates, but will it die if it doesn't cut interest rates in September?
Just like we judge a person, saying that he is 60 years old and has cerebral thrombosis, and he probably won't live long. Does that mean he will die next month?
Maybe he lived to be 100 years old, even though his legs and feet were not agile, but he still had a breath of life.
The market sentiment is a bit too realistic, it's a bit too much.
The counterparty of the Federal Reserve is other currencies in the world, including all other currencies, including RMB, ruble, real, euro, yen, Canadian dollar...
Surprisingly, all of these counterparties predict that the Federal Reserve will cut interest rates in September.
Isn’t this too certain?
The market is confident that there will be a rate cut in September because of what Powell said.
Excuse me, did Powell say that there will be a rate cut in September?
Why is it interpreted as a certain interest rate cut in September?
What did Powell say? Let’s review it again.
Speech occasion
Time: August 23, 2024, local time (late night of August 23, Beijing time)
Location: Jackson Hole, Wyoming, USA
Event: Global Central Bank Annual Meeting
Speech Summary
Powell clearly signaled an imminent rate cut in his speech, but did not directly announce a rate cut in September. His original words and related key points are as follows:
1. Timing of policy adjustment:
"The time has come for policy adjustments. The timing and pace of rate cuts will depend on subsequent data, the changing outlook, and the balance of risks."
2. Inflation and employment conditions:
"Upside risks to inflation have diminished, while downside risks to employment have increased. The Fed is focused on the risks to each of its dual mandates."
“Our contractionary monetary policy has helped restore the balance between aggregate supply and aggregate demand, eased inflationary pressures, and ensured that inflation expectations remain anchored... I am now more confident that inflation will return to the 2 percent level in a sustainable manner.”
3. Labor Market
“The labor market has cooled substantially from its prior overheating. The unemployment rate began to rise more than a year ago and is now 4.3%—still low by historical standards but almost a full percentage point above its level at the beginning of 2023.”
“It seems unlikely that the labor market will be a source of higher inflation any time soon, and further cooling in the labor market is neither desirable nor welcome.”
4. Market reaction:
Powell's speech greatly boosted market confidence. As soon as he finished speaking, the Dow Jones Industrial Average rose 1.1%, the Nasdaq rose 1.5%, and the S&P 500 rose 1.2%. The US dollar exchange rate further plunged, hitting 100.60 at one point, a new low since July 2023.
Market expectations
Although the market has reached a consensus on the Fed's September rate cut, there are still differences in the specific extent of the rate cut. According to data from the Chicago Mercantile Exchange's interest rate monitoring tool "FedWatch", the probability of a rate cut in September is 100%, of which 63.5% (or 64%, 69.5%, etc., with slight differences in data from different sources) of investors believe that the rate will be cut by 25 basis points, while 36.5% (or 30.5%, 36%, etc.) of investors bet on a 50 basis point cut.
Let’s translate this:
1. Powell clearly expressed the signal that the Federal Reserve is about to enter a rate cut cycle.
2. Powell himself did not say that interest rates would be cut in September.
3. The market "predicts" that the probability of a rate cut in September is 100%.
4. Everyone started discussing whether to reduce the price by 25 points or 50 points?
Is this strange? It's like someone officially announced that he was getting married. He didn't say when he was getting married, but people around him started saying that he was getting married next week, and the only uncertainty was whether it would be Wednesday or Thursday.
Excuse me, do “soon” getting married and “next week” getting married mean the same thing?
With market sentiment accumulated to this extent, if the Fed really cuts interest rates in September, I am afraid it will bring disastrous consequences:
The dollar collapsed.
The Japanese yen and the Chinese yuan soared.
Gold prices soared.
Commodity prices skyrocketed.
Money is flowing out of the United States.
US stocks crashed.
Harris was dumbfounded. The Democratic Party was dumbfounded.
Global stock markets crashed.
……
Because if the market predicts correctly, it will cause a short-selling stampede in the US dollar, which is not a peaceful transition.
After Sullivan left, it was said that Yellen was coming. China and the United States have not yet negotiated the terms. Will the Federal Reserve allow such a stampede to happen?
The US dollar is now in a tug-of-war with other global currencies + commodities + gold + international oil prices + digital currencies. What are the characteristics of tug-of-war?
If both sides exert their strength, everyone can exert their strength. If one side suddenly lets go, the other side may be missed and fall out of the field.
Imagine this scene. The two of us are playing tug-of-war on a high platform, surrounded by cliffs on all sides, and below the cliffs is a bottomless abyss. Both of us grit our teeth and push back to the outside of the platform. Who dares to let go suddenly? Although you can push your opponent off the cliff, won't you lose your balance and fall down?
When someone can't hold on, the two of them must discuss how to maintain balance, and reduce each other's force little by little until both sides can stand firm.
Now everyone knows that the dollar is a long-term stock, and the stock price has been hyped from 50 yuan to 100 yuan. Everyone is thinking about running away.
Everyone was still hesitant and wondering whether to sell at the top. Then the dealer said, we need to issue more shares and raise funds.
Do you think the stock price will transition smoothly? It will definitely drop like a waterfall. It will definitely make the banker have diarrhea and pull out his intestines.
Experienced bankers will definitely use various news to throw smoke bombs. Just like Mr. Bao in "Fang Hua", who said he wanted to buy a building for 1 billion. What was his purpose? To boost his own stock. How did he do it? He said that there was a buyer in Hong Kong who wanted 4 billion to take over his building. So, everyone thought he was going to make a lot of money, and only then could the stock price he was holding up be supported, and only then would those self-righteous leeks take over at a high price.
In order to make everyone feel that the big pie behind it is real, there must be a big shot to stand up and say that we are willing to take over for 4 billion.
If the Fed wants to cut interest rates, it must pull in bigwigs to support it, saying that the dollar is still strong, and that the interest rate is lowered because supply is insufficient to meet demand, and that we don’t need to attract deposits at high interest rates. Bigwigs in Japan and Europe have all said that they will not run away, and that they will still increase their holdings of U.S. debt.
In this way, these small investors, including the money of Japan's Mrs. Watanabe, the 2 trillion U.S. dollars in profits that Chinese companies have not brought back from the United States, etc., will become frogs in boiling water and unknowingly support the dollar.
If there was no preparation, the market would be so easy to guess, and everyone would be 100% sure about the Fed's actions, and the money would run faster than rabbits.
There must be a big fluctuation. All the small investors think that the US dollar must strengthen after it weakens, so as to confuse these people.
Now it seems that gold is soaring, oil prices are soaring, and commodities are half dead. How can this be a preparatory move for the US dollar to cut interest rates and release water? It should be that there are large funds lying in ambush and shorting, which is contrary to everyone's "prediction".
If we deduce from the normal operation method, it should be that these big funds will take advantage of the short-selling of the US dollar, and then hit the longs of commodities and oil prices, so that these people will be caught off guard and buried part of them, and then build positions at low prices to take over. When everyone thinks that the US dollar interest rate cut is far away, the interest rate is secretly cut. Push up the commodity price, and then take advantage of two waves of market.
I wonder if the Fed and those big funds operate in this way? Maybe the interest rate meeting in a few days will give us the answer. Anyway, it doesn't look like the rhythm of interest rate cuts now. #美降息25个基点预期升温 #美国经济软着陆？ #特朗普哈里斯辩论未提及加密货币 $BTC
