SMM11, March 30: the United States released the minutes of the November interest rate Resolution meeting in the early morning of this morning, revealing some of the more sensitive information in the market.
The minutes of the meeting show that almost all policy makers agree that if the future US job market and inflation data meet the Fed's current expectations, the next rate hike will come soon, and a few have expressed uncertainty about the timing of the rate hike. Only a few said current interest rates could be close to neutral and that further rate increases would not be appropriate.
It is worth noting that Powell's speech in the early hours of Thursday morning has changed from eagle to dove. Powell said that there is no preset path for policy, interest rates are "slightly below" the neutral range, and the impact of interest rate increases may take about a year. Last month he said interest rates might still be "a long way from being neutral". Comments said Powell's shift could affect the number of interest rate hikes in 2019 from two to three to one or two. Trump's eighth attack on the Fed and Powell this week not only put Powell under a lot of pressure, but also put Powell's reference, Mnuchin, under the same pressure, and Powell's transformation could have a lot to do with Trump.
Of course, the weakness of a series of economic data in the United States also indicates that a series of interest rate increases are not sustainable. U. S. crude oil prices, which were above 60 at the meeting this month, have fallen another $10 so far, dragging down the core PCE price index in October to its lowest level since April. The Fed has set a long-term inflation target of 2 per cent, and a rise in interest rates would be a castle in the air if it falls below 2 per cent. In addition, the manufacturing PMI in the United States in October, the consumer confidence index in November, the monthly GDP rate in the third quarter, and consumer spending in the third quarter all fell to varying degrees, while the latest jobless claims reached the highest level since April. This will be a big test for the non-farm data released in December, with the US economy likely to rise and fall as the effect of Trump's tax cuts wanes.
Or cut the interest rate on excess reserves (IOER)
The rate hike refers to an increase in the "federal funds rate," an interbank lending rate that has been replaced by an interest rate range since December 2008, a short-term target rate set by the Federal Open Market Committee (FOMC).
The actual federal funds rate is called the effective federal funds rate (EFFR), which is based on the calculation of a real, tradable interest rate.
The interest rate on excess reserve reserves refers to the interest rate at which banks deposit excess reserves with the Federal Reserve.
According to the data, it can be found that the correlation between IOER and EFFR is 98%, and the EFFR is basically 10 basis points lower than IOER. After the end of last year, the spread between the two has narrowed significantly, that is, EFFR is constantly rising to approach the upper limit of the range. The main reason is that the upward trend of Treasury interest rates and the continuous contraction of the Federal Reserve have caused the EFFR to rise, which is not conducive to the FOMC to control it within the set range.
Officials suggest that the way is to hold down the IOER, and allow banks to withdraw excess reserves, thereby keeping EFFR within a reasonable range.
Michael Feroli, chief US economist at JPMorgan Chase, said it was also possible for the Fed to slow or suspend the contraction.
On the 18th of next month, the Federal Reserve FOMC will hold a two-day meeting to discuss interest rates, which is expected to be the fourth rate increase this year, the ninth rate increase since 2015, and how many times next year will depend on whether the US economic data are satisfactory.
