China-Singapore Jingwei, December 16 (Dong Wenbo, Yang Siyu) In the early morning of December 16, Beijing time, the Federal Reserve made policy adjustments to accelerate austerity at the last FOMC meeting in 2021. The
statement on inflation was deleted in the meeting statement. "Temporary factors" and "allowing inflation to be moderately higher than 2% for a period of time"
.
It is worth noting that in the latest bitmap,
12 of the 18 committee members are expected to raise interest rates at least 3 times in 2022
; in addition, 11 committee members are expected to raise interest rates at least 6 times before the end of 2023.
Announced the acceleration of Taper, in line with market expectations
The Fed’s interest rate meeting decided to speed up the process of reducing debt purchases. Starting from January 2022, it will be reduced by $30 billion per month on the basis of the original $90 billion in asset purchases (previously it was a reduction of $15 billion per month). Treasury bond purchases decreased by 20 billion U.S. dollars, and MBS (institutional mortgage-backed securities) purchases decreased by 10 billion U.S. dollars.
If this rate of reduction in debt purchases remains unchanged in the future, the entire process will last three months and will end in March 2022.
Fed Chairman Powell said at a subsequent press conference that higher inflation and faster employment progress were the reasons for the decision to speed up debt reduction, and that speeding up the process of debt reduction has been widely supported by officials.
Gao Ruidong’s team, chief macro economist at Everbright Securities, believes that the Fed’s interest rate meeting is basically in line with expectations. Powell continued the dovish statement and accelerated Taper, but still has reservations about raising interest rates.
Based on the composition of the Fed's vote committee in 2022,
strong hawks will still be a minority, and the probability of accelerating interest rate hikes is still low.
Zhong Zhengsheng, chief economist of Ping An Securities, said that the
Fed’s December interest rate meeting announced the speeding up of Taper, which was in line with market expectations
.
The Fed has chosen to "double" the current code reduction rhythm, that is, starting from January 2022, the monthly reduction in the amount of asset purchases will increase from 15 billion U.S. dollars to 30 billion U.S. dollars.
In this way, the Fed will reduce its purchases of assets by a total of $135 billion compared with not changing its pace.
Delete "Inflation is temporary"
In the meeting statement, the expression of inflation deleted "temporary factors" and "allowing inflation to be moderately higher than 2% for a period of time", reflecting the Fed's belief that the inflation target has been reached.
Powell said that inflation and employment progress are the main reasons for the acceleration of Taper. It has not yet been decided to end the interval between debt purchases and interest rate hikes, but it is not expected to be too long; interest rates may be raised before the maximum employment is achieved. If the economy slows down, the rate of interest rate hikes Will slow down.
Zhong Zhengsheng’s team believes that the Fed’s deletion of the word “temporary” is in line with expectations (Powell has “blowed” on November 30), but it did not use new adjectives to describe inflation, but said lightly that “inflation continues to be elevated”, and Did not further emphasize that the inflation situation exceeded expectations.
However, this statement deleted the detailed description of the inflation target, acknowledging that the current inflation has exceeded 2% for a period of time, and further confirming that the average inflation target has been achieved.
Chen Xing’s team, chief macro analyst at Zhongtai Securities, believes that the current shift in U.S. monetary policy is largely affected by
high inflation
.
If high inflation continues to exceed expectations, as Powell said, monetary policy tools will be used to maintain prices. The stability
.
According to Reuters, in the new economic forecast released after the Fed’s policy meeting, policymakers predict that US inflation is expected to reach 2.6% in 2022, and the forecast in September was 2.2%; the unemployment rate is now expected to drop to 3.5%. , Even if it is not achieved, it is close to achieving full employment.
"The economy no longer needs increasing policy support," Fed Chairman Powell said at a press conference after the meeting. "In my opinion, we are making rapid progress in achieving full employment."
In a nutshell,
the scenario outlined by the Fed is the "soft landing" that policymakers hope to see, that is, inflation will gradually slow down in the next few years, and unemployment will remain low while the economy is growing.
According to Cheng Shi’s team, chief economist of ICBC International, the Fed’s action this time showed a “hawk with pigeons” posture. There are three reasons: one is from the trade-off between high economic inflation and private consumption, and the other is from the decision-making level. The medium- and long-term game between doves and hawks officials is based on the basic requirements of the Fed's policy framework.
Interest rate hike is expected to advance
The December dot matrix chart shows that the number of people who are not expected to raise interest rates in 2022 is 0;
12 of the 18 committee members are expected to raise interest rates at least three times
in 2022, and the median interest rate forecast for 2022 will rise from 0.3% to 0.9%.
Reuters reported that the Federal Reserve announced that it will double the speed of "cutting" debt purchases, making it expected to end its plans to purchase US Treasuries and offset MBS in March next year, paving the way for interest rate hikes.
Chen Xing's team believes that due to the further acceleration of the current round of Taper, the time from the start of Taper to the end of bond purchases has been greatly shortened compared to the last time, so
when bond purchases are over in March 2022, it is likely that interest rate hikes will also be put on the policy agenda
.
In the case of structural labor shortages in the US job market, it is difficult for the center of inflation growth to fall quickly, and interest rate hikes are likely to come faster than expected, and it will not be only once next year. It is necessary to be alert to changes in asset prices and domestic rights and interests. The market style will gradually switch to blue chips.
Zhong Zhengsheng’s team said that to
some extent, the Fed is “race” with the market: first, interest rate hike guidance needs to catch up with market expectations, and second, the pace of tightening may need to catch up with the central banks of other developed economies.
Zhong Zhengsheng's team also stated that on the one hand, the Fed needs to minimize the gap in the race against the market, and on the other hand, it needs to reduce the volatility caused by "hawkish surprises" on the market.
For the Fed, in the next 1-2 months, it should further strengthen the guidance of expectations, especially when it will raise interest rates after the Taper ends, and then the definition of "maximum employment" needs to be clarified.
Guosheng Securities Chief Economist Xiong Yuan said that in
view of the slowdown in US inflation, employment, and the economy, the Fed continues to expect the Fed to raise interest rates 1-2 times in 2022, and the probability of raising interest rates 3 times or more is not high
.
As inflation peaks and falls in the United States, and economic and employment data weaken, the Fed is highly likely to "first eagle and then dove," and market interest rate hike expectations will also usher in a cooling down.
(Zhongxin Jingwei APP)
(The opinions in the article are for reference only and do not constitute investment advice. Investment is risky, and you need to be cautious when entering the market.)
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