FED Turns Back But Turns To KILL Long and Short… What’s up?

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2023-01-20 18:49:52

Market situation

After the Fed’s announcement on interest rates, US stocks fell sharply in all three Dow, S&P 500 and Nasdaq indexes. Stock futures are also a red. Oil trades at around $88/barrel. And gold fell to 1635 USD/ounce.

Bitcoin is no exception also volatile but still holds above $ 20,000, the price also dropped to $ 20,300 and at one point went down to $ 20,100. Altcoins also fall as BTC falls.

Fed raises interest rates by 0.75% and comments after the meeting

The Fed over the past day approved a 0.75% interest rate hike for the fourth time in a row and signaled a potential shift in its approach to monetary policy to reduce inflation. This hike raised the base rate to 3.75% -4%, the highest level since January 2008. At the same time, the Fed also continued to sell bonds to push inflation down to the desired 2%.

On balance, Mr. Powell rejected the idea that the Fed might be on a pause soon, although he said he expected a discussion at the next meeting or two about slowing the pace of tightening. currency. He also reiterated that it may take determination and patience to reduce inflation.

The Fed also added that, while job numbers have slowed but are still balanced, the number of jobs is still less than the number of people looking for work. According to the latest ADP data, companies added 239,000 positions in October, ahead of Dow Jones estimates of 195,000 and up slightly from the previous month. Most of the job growth came from the entertainment and hospitality industry, with 210,000 positions while wages rose 11.2% for this industry. Wages overall rose 7.7% from a year ago, down only slightly from September’s pace.

Employment data shows employment and unemployment are not as bad as expected. The Fed also said that, although inflation has fallen slightly, it is still according to estimates and the agency can still manage. In addition, industries that are directly affected by Fed inflation have also seen the impact and demand has cooled.

The agency also understands that it takes time for interest rates to seep into the market and a delay is needed. So the Fed will rely on the percentage of interest rates that it predicts will affect inflation, rather than relying solely on lagging data. The Fed is still aggressive, but it is still repeating the idea that it may be time to slow down the rate of interest rate increases but still need to depend on the situation of inflation.

The Fed says it doesn’t know how long the delay on the impact of rate hikes will be and it needs more time to figure it out. But the Fed thinks that if they accidentally tighten too much, they can relax later, but if the Fed does not tighten enough, the consequences are unpredictable. That is, the Fed will continue to raise interest rates until there are effects or in other words, the consequences are obvious. This statement of the Fed has made the market and investors even more confused.

The Fed says Americans still have money and are spending. Therefore, it takes time for people to spend all their money, then the demand will decrease and then the inflation rate will decrease. House prices are high, but unlike 2008 because the required credit score is higher, the risk of happening like in 2018 the Fed thinks will not happen.

The Fed says rising wages and rising inflation are not their concern. The Fed cares a lot about the core CPI (which is about 5%) because for the Fed that number represents the real rate of inflation. The Fed does not want to tighten more than necessary, but what the Fed wants in doing this is so that the American people will see that inflation will be controlled by their efforts. Because if people think that inflation will continue to be high, it will lead to more spending, increased wages, and an increase in inflation.

In short, the inflation rate is a matter of supply and demand, the Fed can tighten demand but supply cannot. The Fed says a “safe landing” is still possible, but that path is narrowing and it knows that rate hikes can also lead to a financial recession. For the Fed, controlling inflation is still a top priority and the Fed is only interested in the future economy of the US.

Other information:

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  • Meta announced that Instagram is developing a feature to mint and sell NFTs (starting with the Polygon and Solana networks) through its app, which will allow users to create and launch their own NFTs to sell information. via Instagram. Instagram will roll out the new NFT features to a select group of artists and creators before making them available to a wider audience.

  • Deribit futures exchange was hacked and lost $28 million from their hot wallet. Deribit’s chief commercial officer, Luuk Strijers, said that customers’ assets were not affected by their cold storage, but withdrawals were temporarily halted due to security checks carried out by the exchange.

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