Heavy!

The Fed raises interest rates by 75 basis points, a 28-year record!

U.S. stocks rebounded strongly, Powell said: raising interest rates is not normal!

The yuan also soared

  Song Tenghu

  On June 15, local time, the much-watched Federal Reserve interest rate decision was released, and the market’s earlier consensus to raise interest rates by 75 basis points came true.

Federal Reserve Chairman Jerome Powell pointed out that U.S. inflation unexpectedly rose in May and is now moving quickly to cool it.

This rare and large rate hike is not the norm, and there is a possibility of a 50 basis point or 75 basis point rate hike at the next meeting.

  Although the rate hike this time is the strongest since the Fed's single since 1994, after Powell's remarks, the market generally showed relative optimism.

The three major U.S. stock indexes rebounded strongly after a high dive, and finally closed sharply higher.

As of the close, the Dow rose 1%, ending a 5-day losing streak, the Nasdaq rose 2.5%, and the S&P 500 rose 1.46%.

  The yuan soared.

As of the end of the New York exchange market on the 15th, the offshore RMB rose more than 800 points against the US dollar, or 1.3%.

The Fed raises interest rates by 75 basis points, and the expectations are officially implemented

  The Federal Open Market Committee (FOMC) statement published on the Fed's website showed that U.S. economic activity has picked up after a first-quarter slump.

Job gains have been significant in recent months, and unemployment has remained low.

Inflation is high, reflecting supply and demand imbalances related to the pandemic, as well as high energy prices and broader price pressures.

The Russian-Ukrainian conflict has caused serious humanitarian and economic difficulties, and related events have further led to upward inflation and pressure on the global economy.

The Committee closely monitors inflation risks.

  The statement noted that the committee is committed to achieving its long-term goals of maximizing employment and 2 percent inflation.

In order to achieve these goals, the committee decided to raise the federal funds rate to a range of 1.5%-1.75%, and it is expected that further interest rate hikes will be appropriate in the future.

In addition, the Committee will continue to reduce its holdings of Treasuries, agency debt and agency mortgage-backed securities, in line with the balance sheet reduction plan announced at its May meeting.

The Fed's statement added a note that "the Committee is firmly committed to returning inflation to its 2 percent goal."

  With the United States currently facing the worst inflation situation in 40 years, market expectations for aggressive interest rate hikes by the Federal Reserve have increased ahead of this meeting.

Major banks and investment banks such as JPMorgan Chase and Wells Fargo are widely expected to announce that the Federal Reserve may raise interest rates by 75 basis points to curb another surge in inflation.

In March, the Fed raised its target range for the federal funds rate by 25 basis points from near zero, kicking off a tightening cycle to curb inflation.

At the beginning of May, the Fed announced another 50 basis points of interest rate hike, and hinted that it may raise interest rates by 50 basis points each time in June, July and September this year.

  The Fed has already raised rates by 150 basis points this year after deciding to formally raise rates by 75 basis points on Wednesday.

The majority of members supported the resolution to raise interest rates this time, but Kansas City Fed President George voted against it, who suggested raising interest rates by 50 basis points.

Powell speaks loudly, emphasizing that rare rate hikes are not normal

  At the press conference held on the same day, Fed Chairman Powell pointed out "straightforwardly" that Fed officials understand the difficulties caused by high inflation, are strongly committed to cooling inflation, and are now acting quickly.

  Powell said inflation has risen unexpectedly since the May meeting.

In response to the new situation, the committee therefore decided to raise interest rates more significantly.

He stressed that a rare rate hike of 75 basis points is not the norm.

From the current perspective, there is a high possibility of raising interest rates by 50 basis points or 75 basis points at the next meeting.

  The Summary of Economic Projections (SEP) report released at this meeting showed that both interest rate and inflation expectations were significantly higher than the March report.

Specifically, the median expectations for the federal funds rate at the end of 2022, 2023, and 2024 are 3.4%, 3.8%, and 3.4%, respectively, and the March expectations (previous values) are 1.9%, 2.8%, and 2.8%; the expected median forward rate was 2.5%, compared with the previous value of 2.4%.

The median PCE (personal consumption expenditure) inflation expectations were 5.2%, 2.6%, and 2.2%, respectively, compared with 4.3%, 2.7%, and 2.3% in the previous period.

  In addition, the US economic growth is expected to decline, the unemployment rate is expected to rise.

The above-mentioned report predicts that the median GDP (gross domestic product) growth rate at the end of 2022, 2023, and 2024 is expected to be 1.7%, 1.7%, and 1.9%, respectively, and the previous values ​​are 2.8%, 2.2%, and 2%, respectively.

Powell said keeping unemployment low while reducing inflation is not an easy task.

If inflation falls, the unemployment rate rises to 4.1%, which is still an all-time low.

U.S. stocks dived high in the afternoon, rebounded strongly in late trading

  On the same day, the three major U.S. stock indexes opened higher and moved higher.

With the announcement of the Fed's decision to raise interest rates at 2 p.m., the major indexes "dive", and the Dow and S&P 500 once turned down.

Fortunately, the index rebounded late in the session after Powell expressed a strong stance against inflation, raising interest rates by 75 basis points and becoming abnormal.

  As of the close, the Dow rose 1% to close at 30,668.53 points, ending a five-day decline; the Nasdaq rose 2.5% to close at 11,099.15 points; the S&P 500 rose 1.46% to close at 3,789.99 points.

  Zhang Zhiwei, president and chief economist of Baoyin Investment, said in an interview that the rate of interest rate hikes and the guidance given by the Fed were basically in line with market expectations.

Before the meeting, the market was also worried about whether the Fed would raise interest rates by 100 basis points. This fear did not materialize, and the stock market rebounded.

However, the uncertainty facing the economic outlook is very high, and it remains to be seen whether the Fed can effectively control inflation by cutting interest rates and achieve a soft landing.

The market's worries about the risk of recession in the U.S. economy in the future are difficult to eliminate, and the inflation data in the next few months will still be the focus of the market.

  "Irrespective of the consequences of sharp interest rate hikes, today's statement confirms the Fed's determination to fight inflation." Charlie Ripley of Allianz Investment Management believes that, overall, the Fed's interest rate policy and inflation will be a period of time. Uncoordinated, the drastic rate hike now should calm the market for the time being.

  On the disk, large technology stocks generally rose, Amazon and Tesla rose more than 5%, Nvidia rose 4.36%, Facebook parent company Meta rose 3.43%, and Apple, Microsoft, and Google rose more than 2%.

Tesla's stock price is approaching $700, and Nvidia's market value is back above $400 billion.

  Affected by the positive data, Boeing rose 9.46%.

Total deliveries of the 35 aircraft in May more than doubled from 17 in the same period a year earlier, and the total number of aircraft deliveries in the first five months of the year has reached 165, company data released on Tuesday showed.

Of these, 29 737MAXs were delivered to customers in May.

  International oil prices fell, and energy stocks were one of the few sectors that suffered. Occidental Petroleum fell 2.92%, and Exxon Mobil, Chevron, and ConocoPhillips all fell more than 1%.

Data released by the U.S. Energy Information Administration showed that U.S. commercial crude oil inventories were 418.7 million barrels last week, an increase of 2 million barrels from the previous month.

As of the close, the price of light sweet crude oil futures for July delivery on the New York Mercantile Exchange fell $3.62 to close at $115.31 a barrel, a decrease of 3.04%; the price of Brent crude oil futures in London for August delivery fell $2.66 to close At $118.51 a barrel, down 2.20%.

  White House press secretary Karin Jean-Pierre announced at a briefing that U.S. President Joe Biden took action to lower U.S. oil prices by releasing 1 billion barrels of oil per day from the Strategic Petroleum Reserve and working with partners to release additional oil. 240 million barrels of oil.

Biden sent a letter to major oil refineries in the United States on the same day, calling on oil refining companies to take responsibility and cooperate with government actions to reduce oil prices.

  Pierre said that lowering oil prices also requires the cooperation of refiners and cannot take profits at the expense of American households.

The last time crude was $120 a barrel, gasoline averaged $4.25 a gallon, and the current price of gasoline is up 75 cents, she said.

The refining company's profit margin has tripled since the beginning of the year.

  Most popular Chinese concept stocks rose, the Nasdaq China Golden Dragon Index rose 2.01%, Weilai rose 7.77%, Xiaopeng Motors rose 4.85%, Alibaba, JD.com, Baidu rose more than 2%, Pinduoduo, ZTO Express fell more than 1%, NetEase fell 2.23%.

Keywords: