This Federal Reserve meeting in June was quite bland and was basically within my expectations, so I didn't write a commentary immediately. I am now engaged in daily activities related to stablecoins; traditional financial institutions and internet companies have started to FOMO into the market, and there are many opportunities in both the real economy and the secondary market. Stablecoins are sweeping the world.
1. Federal Reserve June Meeting
FOMC Statement:
1. Summary of the Statement: It was unanimously agreed to maintain the benchmark interest rate at 4.25%-4.50%, marking the fourth consecutive meeting of inaction, in line with market expectations.
2. Interest Rate Outlook: The dot plot expects the median interest rate to remain at 3.9% in 2025 (with two rate cuts), while the median for 2026 and 2027 is raised to 3.6% and 3.4%, respectively. Seven out of the 19 officials believe there will be no rate cuts this year.
Commentary from Fat Tiger on the five small goals: Although the dot plot maintained two rate cuts this year, seven of the 19 Fed officials believe there will be no rate cuts this year, which is still relatively hawkish.
3. Inflation Outlook: Inflation remains slightly high. The median core PCE inflation expectations for the end of 2025, 2026, and 2027 have been raised to 3.1%, 2.4%, and 2.1%, respectively.
4. Economic Outlook: The uncertainty of the outlook has weakened but remains at a high level. The median GDP growth expectations for the end of 2025 and 2026 have been lowered to 1.4% and 1.6%.
Powell's press conference:
1. Interest Rate Outlook: Current interest rates are moderate or moderately tight and not considered high. Uncertainty is exceptionally high, and more information can be awaited before adjustments. The Federal Reserve will lower rates when it is confident that inflation is declining. The current employment situation, reasonable economic growth, and gradually falling inflation prompt the Fed to continue waiting. No officials have much confidence in the dot plot interest rate path predictions.
Commentary from Fat Tiger on the five small goals: The biggest reason for the current wait-and-see attitude towards rate cuts is when the understanding king's tariff policy effects will manifest. Additionally, the recent Israeli-Palestinian situation will profoundly affect global risk appetite and oil prices. Last night, Iran stated that a major event impacting the world for centuries would occur, and then symbolically retaliated. Today, Iran has already started seeking peace talks with the U.S.
2. Inflation Outlook: The inflation level has consistently been slightly above the target. One cannot assume that the inflation shock caused by tariffs is merely a one-time event. It is expected that there will be tariff-driven inflation increases in the coming months. Overall PCE is expected to rise by 2.3% in May, and the core index is expected to rise by 2.6%.
Commentary from Fat Tiger on the five small goals: Powell's current stance of not assuming that the inflation shock caused by tariffs is merely a one-time event is correct, but it brings significant 'stagflation' risk for the second half of this year. Once the risk of stagflation is clearly confirmed, the Federal Reserve will have to rapidly and urgently cut rates.
3. Economic Outlook: The economy is in a robust state. It seems to be growing at a rate of 1.5% to 2%. Uncertainty peaked in April and has since weakened.
4. Employment Outlook: The unemployment rate has remained within a narrow range and is at a low level. The labor market conditions remain robust. Multiple indicators suggest that the economy is close to maximum employment levels.
5. Communication Reform: The framework review will be completed by late summer this year, at which point adjustments to the communication strategy will be considered. Enhancements to communication tools will be considered, such as the dot plot.
6. Other: Powell did not reveal his plans after leaving the chairmanship and refused to comment on Trump's insulting remarks.
In light of the U.S. CPI being significantly lower than expected in May, the Federal Reserve still did not cut rates, which certainly has its own sufficient reasons but leaves greater risks for the second half of the year. Additionally, the longer the Fed maintains the rate cut cycle, the more favorable it is to extend the length of this bull market.
Some major benefits I previously predicted have begun to fully materialize, such as the explosive growth of stablecoins.
2. Stablecoins are sweeping the world
In April of this year, when the market was at its darkest and most lacking in confidence, I clearly pointed out that the big trend this year is payfi and stablecoins, which should be the most accurate predictive analysis on the internet. Moreover, I have been involved in matters related to stablecoins in Hong Kong, and it has now fully materialized. There are big news coming out every day regarding stablecoins, and traditional financial institutions, tech companies, and real enterprises have already FOMO'd into stablecoins.
Recently, the U.S. Senate passed the landmark cryptocurrency legislation (GENIUS Act). This is a historic lobbying victory for digital asset companies in the Senate's first comprehensive regulatory reform vote on cryptocurrencies. The next step is to submit it to the House for review. Circles (CRCL), which went public ten trading days ago, surged 34% in one day, plus a 6% after-hours increase, surpassing $211, while the IPO price ten days ago was only $31. The explosion of CRCL also lifted Coinbase (CB), which rose 16% in one day, because USDC on CB has to share 100% of the fees with CRCL, while outside of CB, it shares 50%. CB is the second most analyzed U.S. stock by me in the past three years, next to Tesla.
First, the understanding king hopes the House of Representatives will pass the stablecoin bill at lightning speed. Given the stronger control of the Republican Party over the House, the speed of passage should be very fast.
Second, the direct expenditure of stablecoins by Basent is beneficial for consolidating the dollar's hegemony and again emphasizes the importance of the stablecoin bill.
Third, JD.com claims to launch a JD stablecoin based on a public blockchain. This is beyond expectations; I previously communicated with JD's senior management, and they consistently said it would be based on a consortium chain. If JD can eventually implement a stablecoin based on a public blockchain, then ETH will definitely be the first choice for Layer 1.