Does the Fed have any more cards to play?

In the past few months, CPI has remained above 3%, which is a long way from the 2% threshold for interest rate cuts given by the Fed.

Now I think about it, the Fed is anxious.

If the interest rate is cut, the US dollars that were abused during the epidemic will soon flood the market, and inflation will explode. By then, not only black people will have to buy for free, but also the lower-class white people will have to live in large numbers.

If the interest rate is not cut, GDP will be ruined, and the interest on the more than 30 trillion US debts will not be paid.

And even if the interest rate is not cut, inflation is not under control.

In addition to the interest rate hike, the Fed is also actively shrinking its balance sheet. From mid-2022 to now, it has been recovering liquidity every month.

The decline is estimated to have exceeded 15% so far, which is the same as the balance sheet reduction in 2019, and it is estimated that it will soon end.

But after all, too much money has been printed, and after a combination of interest rate hikes and balance sheet reductions, it still cannot be controlled.

Fortunately, the US stock market has risen well. The AI ​​concept has made Nvidia popular. The stock price has almost doubled 10 times in 3 years, and the stock index has hit new highs.

This is indeed worth learning from. Even if they are speculating on concepts, they are really capable of speculating on them.

In contrast, there is no such thing as "speculating on concepts" in A-shares. It is a long way to go to establish and improve the financing function.

The bad news is that venture capital in the AI ​​concept in the United States has basically stagnated, but no outbreak point has been found so far.

Therefore, it is hard to say how long Nvidia, which sells shovels, can be hyped.

Without this concept, the next hot spot in the US stock market may not be able to catch up for a while.

Consumption is beginning to be stretched, and the AI ​​concept is also a spent force. The Fed is about to play these two cards.

It is generally expected that the balance sheet reduction will end in the third quarter, and consumption will gradually cool down. With the superposition of two factors, the CPI in the third and fourth quarters should be under control.

Of course, the Fed will not let you predict the interest rate cut node, otherwise everyone knows that the interest rate will be cut, and who can bear the collective selling of US dollar assets?

It is hard to say how much of the strong performance of the US stock market this year is due to the early release of expectations for interest rate cuts.

Never let you predict accurately, but always let you feel predictable, this is the ability of the Federal Reserve to manage expectations.

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