The last rate hike in 2022 by the US Federal Reserve (FED) ended with an additional 0.5% increase.
The following press conference was to announce the adjustment strategy in 2023 and the next direction of the FED in the context that macro factors are gradually becoming negative. The corrections all have more or less impact on the volatility of the cryptocurrency market. Inflation and interest rates are also key factors that determine when cash flows will return to the market.
Summary of main ideas:
- The Fed still affirmed the view: High inflation is not good for anyone and is still on the way to bring inflation back to 2%.
- The Fed continues to sell bonds
- The US economy has slowed down, but still growing
- Real estate has cooled down because of high interest rates
- FED estimates GDP 2022 = 0.5%, 2023 = 0.5%
- Spending has decreased
- Employment rate is still good, but will balance (number of vacancies vs. job seekers)
- Only October and November CPI tests show good progress, but more evidence is needed
- This year the Fed raised interest rates a total of +4.25%
- Will continue to raise interest rates until the threshold of 5.1%.
- The Fed has seen a decrease in demand, especially real estate
- But it takes more time to see the effects spill over into other areas.
Answer questions for current and future orientation
- The 5.1% estimate is higher than the 4.5% figure said last month, but the Fed sees it as necessary
- Of course this is just an estimate, not a promise
- 17 out of 19 voters think interest rates will have to be 5%+ in 2023 ==> That means the Fed is in agreement
New York Times: If so, will it increase by 0.75% in 2023, which means it will increase by 0.25% each time or what?
FED: Speed doesn’t matter anymore, what matters is how much to stop and how long to stay there. There are 3 factors that affect inflation and affect our strategy
1. Inflation due to current events like epidemic, war, this will be resolved – Good
2. Housing spending, this is an indicator of delay, new documents will be lower when people sign a new lease – Good
3- Other expenditures are based on consumers, people still have jobs, this is the key
Question: If speed doesn’t matter, is it going to increase by 0.25% starting now?
FED: I haven’t decided yet, depending on the situation (but the Fed doesn’t rule out this possibility)
Washington Post: why increase the max estimate % from 4.6% to 5.1%
FED: Because the percentage of inflation is still high. There are still plenty of jobs left (the Fed fears spending will still be high)
Financial Times: Is the estimate of up to 5.1% reasonable?
Fed: This is an estimate based on what we know right now. The Fed thinks inflation will be at 3.5% by the end of next year.
Axios: No one at the Fed thinks they will cut interest rates next year, why?
Fed: Inflation is still high, we won’t think about cutting rates now
Associated Press: % CPI in October and November fell, can the FED share your thoughts?
Fed: We are very pleased with the CPI document, but we need more such evidence. Like I said, I think %inflation will be ~3.5% next year.
Bloomberg: Landed safely, is there a chance?
FED: We’re happy to see CPI fall, but it takes more time, and we have to keep interest rates high, if inflation slows down, maybe… (in short, the FED avoids this question)
ABC News: At the beginning of the year you said you were prepared to accept pain when the Fed raised interest rates, what about next year?
FED: The most painful times may be over… but be prepared that more companies will lay off employees, it’s inevitable.
CNN: There is a big difference between rich and poor now, do you think about when making decisions about interest rates?
Fed: We have thought about it, but now nothing is more important than slowing down inflation
Question: What if inflation has not decreased as expected and we have entered a recession, so what?
Fed: Right now there’s no reason I think this could happen, we’re just concerned with the issue at hand. (The Fed keeps its message)
Yahoo Finance: Do you think GDP next year is only 0.5%, if there is a recession, how long will the Fed accept a recession?
Fed: We’re not talking about that.
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