The Fed 'sits tight' leaving suspense: Will there be two rate cuts before the end of the year?
On June 19, the Federal Reserve announced it would keep the benchmark interest rate unchanged in the range of 4.25%-4.50%. This marks the fourth time this year they have remained 'still.' The market had already anticipated this outcome, but I still want to complain: What exactly is this group at the Fed waiting for?
To put it simply, the U.S. economy is currently a mess. On one hand, the unemployment rate is low enough to be enviable, and workers have no worries about job security; on the other hand, inflation is like a stubborn adhesive, sticking around 5% and refusing to budge. The Fed itself admits that economic growth has been slashed from 1.7% to 1.4%, while inflation expectations have surged from 2.8% to 3.1%. Doesn’t this clearly indicate that 'the economy is cooling, but prices are still rising'? It's a classic 'stagflation' scenario!
Even more ridiculous is the confusion within their ranks. Among the 19 officials, 10 believe there should be two rate cuts this year, while the remaining 7 have given up and said 'no cuts.' Powell's remark that 'no one can predict the direction of interest rates' is simply nonsense—so you guys don’t even know what to do?
The market's reaction is more telling. As soon as Powell opened his mouth, U.S. stocks plummeted.
Investors are voting with their feet: You say there will be no rate cuts? If inflation rebounds or employment data suddenly deteriorates, this interest rate might be stuck at a high level! What's worse, the Fed also plans to continue reducing its balance sheet, selling government bonds and agency debt, which is like pouring cold water on the stock and bond markets.
I believe the Fed is just 'playing dead.'
The world is in chaos, with the Russia-Ukraine conflict and trade wars erupting; I can understand their reluctance to act rashly. But dragging this out will only increase market anxiety. Investors now feel like monkeys hanging in mid-air, unable to go up or down, waiting for the Fed to throw them a rope one day—or simply let go!
In short, this interest rate drama is far from over. The upcoming employment and inflation data will be crucial; even a slight change could lead to a quick reversal from the Fed. We common folks should remember one thing: don’t put all your eggs in one basket, after all, the 'game' at the Fed has always been about celestial beings fighting, while mortals suffer.
Next, I will continue to strategize my trades. Instead of blindly fumbling around and failing to capture the best entry and exit points, leading to losses, it’s better to follow me; those who agree can directly join in.
