First, let me explain to newcomers and those with weak financial knowledge: whether the bull market can continue to rise depends on whether the Federal Reserve will release more money this year, and the importance of releasing more money! (Those who understand can skip this article)
"Federal Reserve easing" is a commonly used economic term, which mainly refers to the Federal Reserve injecting more liquidity into financial markets and economies through monetary policy tools. The term "easing" vividly describes the flow of funds into the market like water.
In practice, the Fed's money supply usually includes the following methods:
Rate cuts: Lowering the federal funds rate, the overnight lending rate between banks. This lowers borrowing costs, encouraging banks and businesses to borrow more, thus increasing liquidity in the market.
Quantitative easing (QE): The Federal Reserve injects large amounts of liquidity into the market by purchasing Treasury bonds and other long-term securities. Doing so can increase the money supply in the financial system, lower long-term interest rates, encourage borrowing and investment, and thus stimulate economic growth.
Other monetary policy tools: The Federal Reserve can also use other tools, such as the Term Auction Facility (TAF) and the Primary Dealer Credit Facility (PDCF), to provide short-term liquidity to the financial market.
The purpose of the Fed's monetary easing is to stimulate economic growth and reduce borrowing costs by increasing the money supply in the market during economic downturns or financial crises, thereby encouraging corporate investment and personal consumption. However, the monetary easing policy may also lead to side effects such as inflation and asset bubbles.
At a critical moment, the Federal Reserve made a major announcement.
At 2 a.m. Beijing time on April 11, the Federal Reserve released the minutes of its March 2024 monetary policy meeting, which showed that most Federal Reserve officials were worried that inflation would not fall back to the Fed's target of 2% soon, but still expected it to be appropriate to cut interest rates this year. At the same time, they predicted that the pace of quantitative tightening might soon slow down.
On the eve of the release of the Fed's meeting minutes, the U.S. stock market suffered a major negative impact: the U.S. CPI data for March exceeded expectations across the board, and U.S. stocks collectively plummeted. After the Fed released the meeting minutes, the declines of the three major U.S. stock indexes narrowed. As of the close, the Dow fell 1.09%, the Nasdaq fell 0.84%, and the S&P 500 fell 0.95%.
After the release of the latest meeting minutes, the three major U.S. stock indexes rebounded slightly. As of the close, the Dow Jones Industrial Average fell 1.09%, the Nasdaq fell 0.84%, and the S&P 500 fell 0.95%.
Most of the popular technology stocks fell, Tesla, Intel, Qualcomm, AMD fell more than 2%, Apple: AAPL 175.04 4.33% + self-selected fell more than 1%
Trump "bombarded"
On April 10th local time, former US President Donald Trump once again "blasted" the current US President Biden because the latest released US inflation data were all higher than expected.
Trump said on the social media platform that inflation is back and it is serious! The Federal Reserve can never credibly lower interest rates because they want to protect the worst president in American history.
Trump and his campaign have been attacking Biden's economic policies. "Our economy is collapsing and in ruins in this country," Trump said last month.
Since November last year, the US CPI has been higher than expected almost every month. As the economy becomes a core issue in the 2024 US election, high inflation will be detrimental to Biden's election prospects.
4.11 US President Biden can't sit still anymore. The interest rate cut is directly related to whether he can be re-elected
The US CPI in March was higher than expected for three consecutive months, which hit Biden's re-election prospects. In response, Biden publicly stated on Wednesday that he would stick to his expectation of a Fed rate cut, which will be cut by the end of the year. This statement is relatively rare because according to tradition, the White House usually does not comment on the Fed's decisions, and the president has previously promised to respect the independence of the Fed.
Inflation not only disturbs the Federal Reserve, but is also a major concern for Biden. Because high inflation and high unemployment often affect the president's chances of re-election. Therefore, if he wants to be re-elected, inflation needs to be further boosted.
However, the employment data released last week and the CPI data released on Wednesday dealt a new blow to Biden's re-election prospects. Including 300,000 new jobs in March, and three consecutive months of higher-than-expected inflation data may affect voters' views on Biden's economic policies, especially in an election year. Voters may be unhappy with the rising cost of living.
U.S. economic problems have become the focus of voters. Biden defended the results of inflation management and emphasized that the inflation rate has been significantly reduced. But the path to reelection remains challenging as he trails Trump and voters have seen rising mortgage rates. Biden acknowledged that the government still needs to work hard to stabilize prices and promised to address inflation and cost of living issues. Although Biden is expected to cut interest rates, the Federal Reserve is independent in decision-making and may cut interest rates after the election to avoid affecting the integrity of the election.
Wall Street analysts warned that
The latest inflation data for March is disastrous for Biden. Financial blog ZeroHedge believes that officials from the Bureau of Labor Statistics seem to have voted for Trump.
Bloomberg's Enda Curran also said that today's data has both economic and political implications. The economic aspect is simple: it looks unlikely that the Fed will cut interest rates in the short term (unless there is an accident). The political implications are less clear, but equally important: polls have repeatedly shown that voters are unhappy with the economy, and news reports that the inflation story is far from over will not make them feel better.
However, Biden said on Wednesday local time that he insisted on his expectation of a Federal Reserve interest rate cut, and said that the rate cut might be delayed by one month and would take place before the end of the year.
The CPI data for March released by the U.S. Bureau of Labor Statistics on Wednesday exceeded expectations again, and inflation has exceeded expectations for three consecutive months since the beginning of this year. Wall Street analysts generally believe that it is unlikely that the Federal Reserve will cut interest rates in June, and even need to start considering the possibility of raising interest rates. The 10-year U.S. Treasury yield will rise to more than 4.5%. In contrast, U.S. President Biden insisted on his expectation of a Fed rate cut, saying that the Fed will cut interest rates before the end of the year.
David Kelly, chief global strategist at JPMorgan Asset Management, said:
“The noise you’re hearing is the door is shut on a June rate cut. That’s gone.”
Goldman Sachs economists predict that the Fed will cut interest rates twice this year instead of three times. These economists had previously expected rate cuts in June, September and December, but are now optimistic about rate cuts in July and November.
“We think what the FOMC needs to see is three stronger inflation readings from January through March balanced by more months of more moderate readings.”
At the same time, investment bank Barclays expects the Federal Reserve to cut interest rates only once this year.
Summers, former U.S. Treasury Secretary and “whistleblower on high inflation,” said:
The (Federal Reserve) rate hike is still "something I don't want to see", but the "possibility that the Fed will (may) raise rates next" must be seriously considered. Given the US employment, economic growth, and inflation, why would the FOMC consider cutting rates? US inflation now "seems to be accelerating (upward)".
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Bloomberg economist Anna Wong said:
“March is typically a seasonal window for CPI to enter that is favorable for disinflation. However, the fact that core CPI remained the same in March as in February, even though it was equivalent to about 0.3% of core PCE inflation, is not a good development. This report is more likely than February’s to make the Fed concerned that progress in easing inflation is stalling, even though the core figures were the same for both months.”
Ira Jersey, interest rate strategist at Bloomberg, said:
"The rise in the three-month annualized core CPI to 4.5% this year will curb expectations for an early rate cut by the Federal Reserve. The market currently expects a 50 basis point rate cut in 2024, which may be postponed to the end of the year. As expectations of early and large rate cuts dissipate, it is not surprising that the yield curve has flattened."
“The timing of the expected rate cuts in 2024 is a focus for market participants, with the linear market’s forecast for the first rate cut in July already falling to less than half. However, the current three-month annualized increase in ‘super core’ inflation of more than 8% is likely to continue to exert upward pressure on the Fed’s ultimate rate floor expectations.”
“With the CPI data higher than expected, it is almost certain that the 10-year Treasury yield will retest 4.51%. If this level cannot be maintained, then 4.7% will be the next stop.”
However, Biden said on Wednesday that he would stick to his expectation that the Federal Reserve would cut interest rates before the end of the year.
Federal Reserve official Williams spoke after the release of key inflation data in the United States today!
Based on the latest U.S. Producer Price Index (PPI) data, Federal Reserve official John Williams made a series of statements on the economic outlook and the Fed's future actions.
The number of initial jobless claims in the United States was announced at 211,000, lower than the expected 216,000 and the previous value of 222,000. The core PPI (annual rate) in March was 2.4%, slightly higher than the expected 2.3% and significantly higher than the previous 2.0%. The overall PPI (annual) in the United States in March was 2.1%, lower than the expected 2.2%, but higher than the previous value of 1.6%.
Williams stressed that the outlook is uncertain and the Fed should be data-dependent. Williams also announced that the Fed will begin cutting interest rates this year, signaling a change in monetary policy.
Williams said the Fed has made "significant progress" in reducing inflation. He also said there was evidence that reserve levels remain ample, which could influence the Fed's interest rate decisions.
Summary: There will be a rate cut, but there is a high probability of a delay.
Impact on the cryptocurrency market: the bull market is delayed, and Bitcoin will experience turbulent conditions after halving (high volatility, frequent callbacks)
Suggestion: Reduce the amount of long positions, wait for the opportunity, do not open long-term contracts, and do not hold a large position!
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