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Fed meeting: Powell's hawkish tone leaves capital markets' uncertain '

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Is the market really going to bear? What do crypto people think?

原文标题：《美联储决议发利好，鲍威尔鹰派讲话放利空，资本市场"前路未定"丨直击美联储议息会议》

Original author: Wang Jiajian, Babbitt

The shoe finally fell to the ground.

The Federal Reserve's FOMC said in a statement that the interest rate on excess reserves (IOER) remained unchanged at 0.15%. Asset purchases will end in early March. An appropriate increase in the federal funds rate will come soon. The discount rate was left unchanged at 0.25%. Will begin shrinking the balance sheet after raising interest rates.

That means, in line with market expectations.

After the Federal Reserve interest rate resolution, the three major U.S. stock indexes rose in the short term, the rise expanded. The Dow rose 1.2%, the Nasdaq 2.9% and the S&P 500 1.93%. Bitcoin briefly rose 2% to $38,800 on the news. ETH rose 3 per cent to above $2,700.

But when Fed Chairman Jerome Powell spoke, his apparently hawkish comments sent sentiment plummeting in U.S. stocks and crypto markets, and asset prices saw a quick correction.

Therefore, just from the price performance of the capital market, not only the market is greatly affected by the US monetary policy and the US stock market, there is also a great long and short "divergence" in the price here.

What did the Fed and Powell say?

If you look at the FOMC statement alone, then the result is in line with market expectations.

Let's look at the Fed FOMC1 statement in detail, which said a lot of seemingly "useless" but obviously valuable words. Here are some important excerpts:

"The Committee decided to maintain the target range for the federal funds rate at 0% to 0.25%. With inflation well above 2% and the labor market strong, the Committee expects that it will soon be appropriate to raise the target range for the federal funds rate. The Committee decided to continue reducing the pace of its monthly asset purchases, ending them in early March. Beginning in February, the Committee will increase its holdings of Treasury securities by at least $20 billion and agency mortgage-backed securities by at least $10 billion per month."

What exactly does that mean? Here are some excerpts from analysts in traditional markets, such as Dennis DeBusschere: "There was nothing new in the FOMC statement, but the rate statement provided some near-term support to the market, certainly relative to a 50 basis point hike in March or the end of QE in January."

路透社分析：「美联储暗示可能在 3 月加息，并重申在当月结束购债，然后开始大幅缩减资产（负债表），这些联合措施将完成从『定义了大流行时代的宽松货币政策转向更紧迫地对抗通胀的转变』。」

Juan Perez, senior currency trader at Monex USA, said: "Sounds like they don't believe in raising interest rates the fed the decision time must be in March, because they keep considering policy rates for on-demand adjustment space. The balance sheet unchanged before to start raising interest rates, means that they did not completely cancel all easing. We think it is possible, in the short term is not a good sign for the dollar."

Federal Reserve Chairman Jerome Powell holds a monetary policy press conference following the announcement of the Fed's interest rate decision. The announcement also had a huge impact on the market. At least from the crypto market asset price performance, directly back up, all the way down. What did Powell say?

He said: "Inflation remains far higher than our long-term goal. Inflation is expected to fall within this year. Considering the inflation and employment, economy no longer needs to continue the high level of support. The economic outlook remains highly uncertain, need to be humble. The federal funds rate is the main policy tools. We shrink their balance sheets will occur after the start of the increases in interest rates. No decision has been made on the timing and pace of balance sheet reduction, and all details of the path will be adjusted."

Mr Powell noted that the Fed's two main mandates call for it to abandon its highly accommodative policies. These very hawkish comments took many by surprise and the markets by surprise.

Powell sounded enthusiastic about the future, but the language was technically hawkish, analysts said.

Cardillo, chief market economist at Partan Capital Securities, said: "Powell created some uncertainty in the q&A session of the press conference and I think that's why the market reacted. Powell said inflation could get worse, supply bottlenecks could get worse, and that was supposed to be an attempt to prepare the market for worse and try to balance out some of the panic factors. But it's creating an atmosphere of uncertainty and that's not good for the market."

Mikko, the crypto KOL and founder of Thinktank, who knows more about monetary policy, commented that his 13 years of continuous tracking of the Federal Reserve had hardly helped him. Because Powell has so far outlined a path beyond almost every possibility he has experienced.

Powell apparently surprised a lot of people.

Is the market really going to bear? What do crypto people think?

In view of the above, we have seen some insights from many analysts and KOL in the crypto industry, which are excerpted below:

"Powell has chosen the hard way: he has a hawkish answer to every question. The last time that happened was in late 2018." - @ MacroAlf

"The Presbyterians gather in a back room, as they have been doing since 1913. If the chimneys smoke black, it means there is no change. If the chimneys smoke white, it means they will increase the price of money by 0.25 percent." - @ LynAldenContact

"The fed's decision to come out is really good, Powell a speech becomes negative, but, according to analysts view the current interest rates are within expectations, may not have too big change. For the influence of the industry, good just released a lot of money to buy, bad after high fall, consumes a lot of bull power, the current situation is not optimistic. - @ Phyrex_Ni

They will try to avoid black swans, and the market will try to be psychologically prepared. But the direction and purpose are clear, and implementation is necessary." -- Mining penguin

Either way, the Fed meeting may be the most pivotal event that will determine the future of the economy. The macro context of the global economy is here, and its impact will continue.

Note: Here's the timeline for important Fed rate decisions in the first half of 2022, EASTERN time.

March 15-16. Fed rate decision, press conference, dot plot, economic forecast

B: May 3rd and 4th. Fed interest rate decisions, press conferences

June 14th - 15th. Fed rate decision, press conference, dot plot, economic forecast