SMM News: so far this year, the Fed's most distressing problem is the depressed inflation rate, so what does it mean that this index remains low? The damage caused by low inflation is not just the deficit. If economic growth slows or a recession occurs, the economy will fall into complete deflation. The May non-farm payrolls data will be released on June 7. Will the "black swan", which the Fed is also afraid of, fly out? Spot gold hovered around the 1270 level on Wednesday after a sell-off that fell to a more than half-month low. Market risk aversion sentiment has eased, gold prices fell below the key trend line support, the future may fall to this level. In addition, investors will have minutes of the Fed meeting on Wednesday and are expected to stir the market again.
Behind the upcoming May non-farm report, there is a "black swan" that the Federal Reserve is also afraid of.
So far this year, I believe many people are tired of listening to the Fed's concerns about low inflation. What many people don't understand is why the Federal Reserve has been clinging to low inflation in pursuit of rising prices in today's booming job market and a strong economy. Some have even begun to speculate that low inflation is just an excuse for the Fed to cut interest rates. In fact, the Fed's concerns do have a reason.
The unemployment rate in the United States is now at its lowest level since 1969. Under normal circumstances, wages will be stimulated as companies compete for workers, and rising labour costs will most likely be passed on to consumers, pushing up inflation. Now, as inflation remains low, the deficit in the US economy is widening.
Brad, chairman of the St. Louis Federal Reserve, said in an interview: "given that the unemployment rate has been below 4 percent for a long time and that economic growth in the United States has shown unexpected vitality, the lower-than-expected inflation rate is worrying. The correctness of the Fed's decision and whether the US economy is moving in the wrong direction. "
Powell, chairman of the Federal Reserve, also sees weak inflation as one of the main challenges facing the United States in this era. To address this problem, Powell led the Fed in a year-long review of the tools and strategies it used to identify measures that could sustainably push inflation back to the Fed's target.
The damage from low inflation is not just the deficit. The other risk is the Fed's nightmare.
In addition to the increase in the deficit, the more creepy risk of low inflation is that if growth slows or a recession occurs, the economy will fall into complete deflation. And because consumers know prices will be lower tomorrow, they will hoard cash, adding to the downturn. It also means that policymakers will have less room to relax in the next recession, as interest rates take into account price increases.
New York Fed Chairman Williams warned: "this is a dangerous cycle." During a recession, central banks will not be able to bring inflation back to its target level by cutting interest rates, and are expected to fall further as the business cycle goes on. "
What should the Fed do when non-farmers are about to be announced in May?
The May non-farm payrolls data will be released on June 7, after better-than-expected non-farm payrolls in March and April, and a sharp increase of 263000 in April. And the previous release of CPI data in April after the adjustment of the CPI monthly rate was less than expected. The good May non-farm payrolls data is not necessarily good news for the Fed because it means the Fed must raise inflation to its target ahead of the deflationary crisis.
In addition, senior Fed officials will conduct a new round of strategic reviews in Chicago next month, when statements by relevant officials may reveal the future policy direction of the Fed.
However, no matter how it takes to raise inflation, the Fed must convince the markets of its determination to raise inflation. According to a survey by research firm MacroPolicy Perspectives, only 56 per cent of Fed observers believe policymakers have the tools to achieve their goals, down from 60 per cent a year ago. Two recent Fed surveys show that inflation expectations are falling for both economic forecasters and consumers.
After all, against a backdrop of tax cuts, high government spending and exceptionally low unemployment, the Fed cannot sustain a modest increase in inflation. What reason to believe they can do better in a recession?
FOMC meeting minutes attack, investors are concerned about whether to disclose more information
The minutes of the meeting of the Federal Open Market Committee (FOMC) from April 30 to May 1 will be released by the Federal Open Market Committee (FOMC) on Thursday 02: 00 Beijing time.
The FOMC left interest rates unchanged at its meeting from April 30 to May 1. The Fed said it would be "patient" in judging the next steps in policy. The Fed had previously hinted that there was no need to adjust monetary policy throughout the year.
Bloomberg economists wrote that the minutes of the FOMC meeting from April 30 to May 1 will make it clearer that policymakers agree that the recent weakness in economic activity and inflation is temporary. In addition, while many Fed officials said the deteriorating global growth outlook was the reason for their shift to doves at the start of the year, the situation appeared to have improved at the time of the meeting. The minutes will reveal the views of policymakers on the state of the global economy before trade tensions escalate.
Analysts pointed out that Powell's neutral language in his latest speech did not show dovish rhetoric, which supported the dollar.
Gold lost its luster as the dollar strengthened and risk appetite improved ahead of the release of the minutes of the Fed's latest policy meeting. Gold fell on Tuesday, falling below the $1270 / oz mark at one point in the day. Gold prices suffered a sell-off, falling to a more than half-month low at one point. In early trading on Wednesday in Asia, spot gold was up to $1274 an ounce.
Analysts believe that gold prices have recently hovered around the upward trend line 1272, which began in mid-August 2018, and have now fallen below, with support in the 1260.80-1263.76 price area, followed by the 1235.11-1238.00 area.
If prices rebound, the upper resistance is seen in the 1303.70-1309.12 area, after the breakthrough or in the 1323.40-1326.30 price range near the encounter a small amount of resistance, if one after another, the further upward target to see the February high of 1346.75.