The Federal Reserve has sent key signals! Brothers, a slow bull market has officially begun!
To help everyone understand quickly, I have summarized the key interpretations from the Federal Reserve's meeting:
1. The dot plot signals a hawkish bias: The dot plot shows that the median forecast for interest rate cuts this year remains at 2 (consistent with last December), but
The number of people supporting more than 2 rate cuts this year has decreased: from 15 to 11.
· Last dot plot: 10 officials expected 2 rate cuts, 3 expected 1 rate cut, 1 expected no rate cuts
· This dot plot: 9 officials expected 2 rate cuts, 4 expected 1 rate cut, 4 expected no rate cuts
2. Increased uncertainty regarding stagflation: The economic forecast (SEP) has lowered the 2025 GDP forecast by 0.4 percentage points and raised the 2025 inflation forecast by 0.2 percentage points. The statement "the risks to achieving employment and inflation targets are broadly balanced" has been removed and replaced with "uncertainty in the economic outlook has increased."
3. A subtle slowdown in balance sheet reduction: What was surprising at this meeting was the announcement to slow the pace of balance sheet reduction starting in April, lowering the monthly redemption cap for U.S. Treasury bonds from $25 billion to $5 billion. Powell emphasized that this is not a change in monetary policy stance, but a technical adjustment to address the debt ceiling, and it may imply a delay in the end of balance sheet reduction. However, given the current situation, the market may think more about it. The last time the Federal Reserve announced a slowdown in balance sheet reduction was in May 2019, and it officially stopped in August 2019.
4. A carefully arranged press conference, Powell said four key sentences to instill confidence in the market:
· No need to adjust the policy stance (previously it was "not in a hurry to adjust", now it is "no need to adjust", which expresses confidence in the economy)
· The impact of tariffs on inflation is temporary (implying that tariffs are not as serious as people imagine)
· There will be no inflation story to tell in five years (expressing confidence in inflation)
· If the labor market weakens, we can loosen policies if necessary (providing some reassurance to the market)
Brothers, there are 2 potential scenarios for the future policy path: a cooling of inflation leading to rate cuts, or a sharp deterioration in the economy leading to rate cuts; both are possible.
The more chaotic it is now, the more favorable it is; brothers, a slow bull market has officially begun!
