Federal Reserve Fist: Continue to reduce interest rates by 25 base points + end of contraction in December
Milan, director of Trump Chin Point, as he did the last time, advocated a 50-base point, while another vote was in favour of a stand-off。
Original title: “Federated Fed Fist Fist: Continuing interest rate reduction 25 Basepoint + end of contraction in December, the two voting committees opposed the interest rate resolution”
Original by: Li Dan, Wall Street
Points:
• The Federal Reserve has reduced interest rates twice in a row at 25 basis points and has acted in accordance with market expectations。
• THE FED ' S ABBREVIATION ENDED THREE AND A HALF YEARS LATER AND DECIDED TO REPLACE MBS MATURITY WITH SHORT-TERM TREASURY BONDS FROM DECEMBER。
• MILAN, THE NEW MEMBER OF TROMPLE’S “CHIN POINT” IN THE TWO FOMC VOTING COMMITTEES OPPOSED TO THE INTEREST RATE RESOLUTION, ADVOCATED A 50-POINT REDUCTION, AS DID THE PREVIOUS MEETING, AND SCHMID, THE CHAIRMAN OF THE KANSAS CITY FEDERAL RESERVE, SUPPORTED A MILITARY HOLD。
• The statement reiterates the decision to change the “recent” data indicator to “available” “in view of the shift in the risk balance”, adding that recent labour market indicators are consistent with the pre-closure trend of the Government and that the downside risk of employment has increased in recent months。
• “New Federal Reserve News Agency”: While the Federal Reserve continues to work to prevent the recent slowdown in employment from worsening, the lack of economic data has left future interest rates in disarray。
THE FED CONTINUED ITS INTEREST-RATE REDUCTION ACTIONS, AS EXPECTED BY THE MARKET, WHILE AT THE SAME TIME DECIDING TO ABANDON QUANTITATIVE AUSTERITY (QT) AND END THE BALANCE SHEET REDUCTION PLAN IN ONE MONTH。
ON WEDNESDAY, 29 OCTOBER, UNITED STATES EASTERN TIME, THE FEDERAL RESERVE ANNOUNCED AFTER THE MONETARY POLICY COMMITTEE FOMC MEETING THAT IT WOULD LOWER THE TARGET AREA OF THE FEDERAL FUND INTEREST RATE FROM 4.00 PER CENT TO 4.25 PER CENT TO 3.75 PER CENT TO 4.00 PER CENT, A DECREASE OF 25 BASIS POINTS. THIS IS THE FIRST CONSECUTIVE FOMC DECLINE IN ONE YEAR, FOLLOWING THE FIRST REDUCTION IN INTEREST RATES IN THE LAST SESSION。
THE CURRENT INTEREST-RATE DECISION IS ENTIRELY UNEXPECTED TO INVESTORS. BY THE END OF THIS TUESDAY, CME TOOLS SHOW THAT THE FUTURES MARKET IS EXPECTED TO REDUCE INTEREST RATES BY 99.9 PER CENT FOR 25 BASIS POINTS THIS WEEK, WHILE THE PROBABILITY FOR THE NEXT MEETING IN DECEMBER TO CONTINUE TO REDUCE INTEREST RATES BY 91 PER CENT. THIS SHOWS THAT THE MARKET HAS ALMOST FULLY ABSORBED THE THREE COMBINED INTEREST RATE REDUCTIONS EXPECTED DURING THE YEAR. THE INTEREST RATE OUTLOOK PUBLISHED AFTER THE LAST FOMC MEETING IN SEPTEMBER SHOWS THAT MOST FED POLICYMAKERS HAVE INCREASED THE NUMBER OF EXPECTED INTEREST REDUCTIONS THIS YEAR FROM TWO IN JUNE TO THREE。
AT THIS MEETING, AS AT THE PREVIOUS TWO MEETINGS, THERE WAS STILL NO AGREEMENT ON INTEREST RATE ACTIONS AT THE FEDERAL RESERVE ' S DECISION-MAKING LEVEL. TWO FOMC MEMBERS VOTED AGAINST THE 25-POINT DECISION, INCLUDING MILAN, THE NEW PRESIDENT OF THE UNITED STATES OF AMERICA’S “CHING POINT”, REFLECTING THE PERSISTENCE OF DIFFERENCES WITHIN THE FED, UNLIKE BEFORE, IN TERMS OF BOTH THE REDUCTION AND THE CONTINUATION OF ACTION。
THIS TIME, THE FED ANNOUNCED THAT IT WOULD END THE ABBREVIATION OF THE QT FROM DECEMBER, BUT IT WAS NO SURPRISE. TWO WEEKS AGO, UNITED STATES FEDERAL RESERVE CHAIRMAN POWELL HAD SUGGESTED THAT THE CONTRACTION WOULD BE DISCONTINUED, STATING THAT BANK RESERVES WERE STILL SUFFICIENT AND THAT IT MIGHT BE APPROACHING THE LEVEL REQUIRED TO STOP IT IN THE COMING MONTHS. THE WALL STREET NEWS ARTICLE THIS WEEK MENTIONS THAT MOST WALL STREET EVENTS, SUCH AS GOLDMAN SACHS AND MORGAN CHASE, ARE EXPECTED TO STOP THE CONTRACTION THIS WEEK DUE TO RECENT SIGNS OF LIQUIDITY TENSION IN THE CURRENCY MARKET。
Following the announcement of this resolution, a senior Fed journalist, Nick Timiraos, known as the New Federal Reserve News Agency, wrote:
"The Fed again reduced interest rates by 25 basis points, but the lack of (economic) data has left the future in a state of confusion. I don't know
“The Fed has continued its efforts to prevent a worsening of the recent slowdown in employment by lowering interest rates on two consecutive occasions. The easiest part of the effort to eliminate the Fed ' s radical interest rate hike may have been completed, and the next reduction is being discussed by the Fed officials. This delicate task is compounded by the lack of data due to the closure of the Government. I don't know
THE ABBREVIATION LASTS THREE AND A HALF YEARS
The main difference in the post-session resolution statement compared with the previous one was, first and foremost, an adjustment to the abbreviation。
THE STATEMENT DOES NOT CONTINUE TO REITERATE THAT THE FED WILL CONTINUE TO REDUCE ITS HOLDINGS OF UNITED STATES TREASURY, INSTITUTIONAL AND INSTITUTIONAL MORTGAGE SUPPORT SECURITIES (MBS), BUT RATHER MAKES CLEAR THAT:
"(FOMC) THE COMMISSION DECIDES TO END THE REDUCTION IN HOLDING OF ITS AGGREGATE SECURITIES ON 1 DECEMBER. I DON'T KNOW
This means that the Fed ' s abbreviation will end after three and a half years。
THE FEDERAL RESERVE BEGAN A CONTRACTION ON 1 JUNE 2022, AND FOR THE FIRST TIME IN JUNE LAST YEAR IT BEGAN TO SLOW DOWN THE SCALE OF THE HIGHEST MONTHLY US TREASURY DEBT BY $35 BILLION TO $25 BILLION, FURTHER SLOWING DOWN IN APRIL THIS YEAR, BRINGING THE CEILING OF THE MONTHLY TREASURY DEBT DOWN TO $5 BILLION, AND THE CEILING ON INSTITUTIONAL DEBT AND MBS TO $35 BILLION A MONTH。
According to the communiqué on the implementation of monetary policy decisions issued by the Federal Reserve this Wednesday:
For United States Treasury bonds due in October and November, the Federal Reserve is to extend the portion of principal payments above the $5 billion ceiling per month through a bid extension and, as of 1 December, the principal of all sovereign bonds through a bid extension。
WITH RESPECT TO INSTITUTIONAL DEBT AND MBS HOLDINGS DUE IN OCTOBER AND NOVEMBER, THE FEDERAL RESERVE IS TO EXTEND THE PORTION OF PRINCIPAL PAYMENTS ABOVE THE $35 BILLION CEILING PER MONTH, AND REINVEST ALL INSTITUTIONAL PRINCIPAL PAYMENTS IN TREASURY BONDS AS OF 1 DECEMBER。
THIS IS EQUIVALENT TO THE FEDERAL RESERVE’S MBS BUY-BACK OF PRINCIPAL, WHICH WILL BE REINVESTED IN SHORT-TERM U.S. TREASURY BONDS, REPLACING THE MBS HOLD-UP THAT MATURES, AFTER THE ABBREVIATED SCHEDULE IS DISCONTINUED IN DECEMBER。
In response to the decision on the abbreviation, Timiraos noted that Federal Reserve officials had long stated that once indications were found in the overnight loan market that banks were no longer in surplus, the contraction would stop, and that those signals had become more apparent in the past week. The Federal Reserve will begin replacing maturing bonds with short-term treasury bonds in December。
Milan, against the vote committee, insists on cutting interest rates
THE SECOND MAJOR DIFFERENCE IN THIS FEDERAL RESERVE RESOLUTION STATEMENT IS THE FOMC VOTE. THERE WAS ONE MORE VOTE AGAINST THIS TIME THAN AT THE PREVIOUS MEETING AT THE END OF JULY。
The vote showed that 10 voting members, including Powell, were in favour of a further 25 basis points. Of the two opponents, Milan, the interim Fed Governor immediately before the FOMC meeting in September, insisted on a radical reduction in interest rates at the last meeting, still wishing to lower 50 basis points. The Chairman of the Kansas City Federal Reserve, Jeffrey Schmidt, objected because he supported the maintenance of interest rates。
THIS IS QUITE DIFFERENT FROM THE VOTE AT THE FOMC MEETING AT THE END OF JULY. AT THAT TIME, TWO PEOPLE VOTED AGAINST THE RESOLUTION SUSPENDING INTEREST RATES. TWO OPPONENTS — FEDERAL RESERVE COUNCILER WALLER AND VICE-PRESIDENT BOWMAN, WHO WAS NOMINATED BY TRUMP FOR FINANCIAL SUPERVISION, FAVOURED A 25-POINT REDUCTION。
Bob Michele, Global Fixed Proceeds Manager in the Assets Management of Chase Morgan, commented that Powell was losing control of the Fed. A “convincing” person is needed to lead the Fed. Trump may have had to place United States Treasury Secretary Besent in the Fed to promote his own interest rate policy advice。
Recent labour market indicators are consistent with the government's pre-closure trend
The difference from the previous Federal Reserve resolution is also reflected in the presentation of the economic situation. The adjustments mainly reflect the delayed release of multiple economic data as a result of the continued closure of the United States federal government since its entry into October。
At the beginning of the previous statement, the words “recent indicators show a slowdown in economic growth in the first half of the year” were reiterated, and the words “recent” were replaced by the words “accessible” at the beginning of the current statement
Available indicators show that the pace of expansion of economic activity has slowed. I don't know
According to the previous statement, “employment growth has slowed and unemployment has risen slightly but remains low. Inflation has risen and remains slightly higher. This statement adds a time limit on labour market and inflation trends and adds that recent labour market indicators are consistent with the trend reflected in the publication of data before the closure of the government. The statement reads:
“Employment growth has slowed this year and unemployment has risen slightly but remained low as of August; more recent indicators are consistent with these trends. Inflation has risen since the beginning of the year and remains slightly high. I don't know
This new formulation is consistent with Powell's statement two weeks ago. He said at the time: “It is fair to say that, according to the data available to us, the prospects for employment and inflation have not changed much since we met four weeks ago in September. I don't know
As was the case with the previous statement, this statement also states that the decision to reduce interest rates is “in view of the shift in the risk balance”。
THE PRESENT STATEMENT REITERATES ONCE AGAIN THAT THE FOMC COMMITTEE HAS FOCUSED ON TWO ASPECTS OF THE RISK INVOLVED IN ACHIEVING THE DUAL MISSION OF FULL EMPLOYMENT AND PRICE STABILITY, AND HAS LARGELY FOLLOWED THE JUDGEMENT OF THE INCREASE IN THE RISK ASSOCIATED WITH THE NEW EMPLOYMENT DOWNWARDS, AS STATED IN THE PREVIOUS STATEMENT, WITH THE ONLY DIFFERENCE THAT INCREASES THE TIME LIMIT FOR THIS CHANGE IN RISK。
THIS STATEMENT NO LONGER STATES, AS IT DID LAST TIME, THAT FOMC "JUDGES THAT THE DOWNSIDE RISK OF EMPLOYMENT HAS INCREASED", BUT THAT "THE COMMISSION IS CONCERNED ABOUT THE RISKS OF ITS DUAL MISSION AND THAT THE DOWNSIDE RISK OF EMPLOYMENT HAS INCREASED IN RECENT MONTHS. I DON'T KNOW
The following red words can be found in the last deletions and additions from this resolution statement。
