The Federal Reserve suspends rate hikes Market sentiment and future trends outlook

Federal Reserve Halts Rate Hikes Examining Market Sentiment and Predicting Future Trends

Author: Phyrex, Binance Square Creator Source: X (original Twitter) @Phyrex_Ni

Although many buddies think that the current macro sentiment has nothing to do with the price of the currency market, it doesn’t hurt to understand the changes in the macro market. After all, funds are still funds. When the market continues to be in a tight state, even if the currency market can have an independent market, but when external funds are difficult to enter, both the price increase and the emotions of investors will be limited. Especially tomorrow morning is the November interest rate meeting of the Federal Reserve, to put it bluntly, as we have expected many times, the Federal Reserve will not raise interest rates in November, it has been determined, and the federal rate in the United States will continue to be maintained at 5.5%, but this suspension is called “hawkish pause”.

In fact, since the interest rate was raised to 5.5% in July, the market generally believed that the Federal Reserve will not continue to raise interest rates, and now it is the first time since the first rate hike in March 2022 that two consecutive interest rate meetings did not consider interest rate hikes. Therefore, most discussions in the market are that it has already entered a complete pause in interest rate hikes. But is it really that simple? The economic situation in the United States is evident at the numerical level. The GDP in the third quarter reached a high point of 4.9%, house sales have remained strong, wage growth has continued to rise even though it has not outpaced inflation, the unemployment rate is still at a historical low, there are a large number of job openings (Bureau of Labor Statistics), and even the core PCE is far from 2%. The only “positive” data is the recent surge in Treasury yields.

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Under these data, there are still many analysts who believe that the Federal Reserve is still in a hawkish pause, which means that although the interest rate hike is paused, tough talk is still being made. Powell has hinted that the leader of the Federal Reserve would rather wait until the interest rate hike is close to the end to evaluate the impact of past interest rate hikes on the economy. Because inflation is still far above the committee’s 2% target and the economic growth rate is approaching a two-year high, policymakers hope to retain the option to take action again. In the case of continued resilience in the economy, it is not impossible to raise interest rates again in December. Of course, at this stage, whether to increase or decrease interest rates one more time is no longer the biggest focus. The current interest rate is already the highest point in nearly 20 years, even if there is no interest rate hike, it will be a great challenge for the risk market to come.

Speaking of the pause by the hawks, it represents that although there will be no interest rate hike this month, Powell’s speech should still maintain a hawkish stance. In fact, even during the Q&A session, Powell should not easily express the end of the rate hike cycle. Instead, he may emphasize that the Federal Reserve still has the possibility of continuing to raise interest rates. This may not be good news for traditional risk markets, as the no rate hike measure has already been expected for November and the market has already reacted in advance. The lack of interest rate hike will not create a very positive market sentiment boost. Ultimately, it depends on Powell’s speech, and before the interest rate meeting at 2:00 a.m., there is also the US Treasury’s future bond issuance plan at 8:00 p.m. This may be an event more important than Powell’s speech, and may even affect Powell’s speech.

The US Treasury sells a large amount of bonds to meet the borrowing needs of the federal government. In order to prepare investors, the Treasury has been issuing “quarterly refunding” statements for decades. The quarterly refunding announcement will reveal to what extent the Treasury will increase the sale of long-term debt to fund the expanding budget deficit. Although the Federal Reserve has already made statements about reaching the limit level of interest rates in the past, the sell-off of government bonds is still accelerating. The current yield has reached the highest level since the global financial crisis, which also makes the cost of redeeming government bonds higher. Therefore, what investors in the current market are more concerned about is the supply of government bonds. The current expected scale of refunds in the market is $114 billion.

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