SMM12, 20 / 20-the Federal Reserve raised interest rates by 25 basis points early this morning, ranging from 2.00% to 2.25% to 2.50%, and the final boots of 2018 fell to the ground. The Fed raised interest rates four times in 2018 and nine times since 2015.
Although the rate increase was unanimously approved by all officials at the meeting in November, it was still twists and turns. The published annual rate of the US core PCE price index for October, released at the end of November, was only 1.8%, below the previous value and forecast, and 0.2 percentage points short of the Fed's long-term inflation target of 2%, which is the most important inflation reference data. It's obviously not up to standard. At the same time, Trump jumped out for two days in a row to urge not to raise interest rates, which is the 12th time he has publicly expressed his dissatisfaction with the Federal Reserve during his term of office. At the same time, Trump was supported by trade adviser Navarro, who joined forces to put pressure on the Fed. The hope is to force the Fed to stop raising interest rates in December.
One thing Powell and Fed officials may not have thought of when they met in November was that oil prices would fall at such a devastating rate. At its peak in October, US crude oil reached US $76.9 a barrel and has fallen by US $30 so far, which is undoubtedly a blow to the previous hot economic growth of the United States and suddenly changed Wall Street's expectations for the future of the US economy. But the so-called water is difficult to collect, Fed officials at the beginning of the decision to raise interest rates was almost unanimous, so even if the December rate hike will continue to rise, can not break their word in the market, can not hit themselves in the face of their own. The expectation of raising interest rates next year, three times is clearly untenable, if it is to go to the neutral interest rate of 3%, plus 2 to 3 times, the future game will largely depend on the price of crude oil and the performance of U. S. stocks. Oil prices are one of the most powerful drivers of inflation, and US stocks are Trump's favorite political bargaining chip. If US stocks continue to plummet, Trump will continue to oppress Powell and let him back down. He pioneered the US president's intervention in the independence of the Federal Reserve and is sure to intervene to the end.
Predictably, the US economy will slow down next year and Trump's tax cuts will no longer pay dividends, as can be seen from the Fed's first cut in economic forecasts in two years (the GDP forecast fell 0.2 per cent to 2.3 per cent in 2019. Maintaining 2% in 2020 and 1.8% in 2021), Americans lack confidence in the economy for the next few years, Trump's loss in the mid-term elections will make his big infrastructure plan extremely difficult, and the Fed's rate hike may not be far from over.