The Fed keeps the interest rate unchanged

Abstract At 2 am Beijing time on the 17th, the Federal Reserve announced that it will maintain the benchmark interest rate of 0.25%-0.50%. Since the first interest rate hike in more than nine years last December, the Fed has held two consecutive meetings. The Fed’s decision was in full compliance with market expectations, before...
At 2 am Beijing time on the 17th, the Federal Reserve announced that it will maintain the benchmark interest rate of 0.25%-0.50%. Since the first interest rate hike in more than nine years last December, the Fed has held two consecutive meetings. The Fed’s decision was in full compliance with market expectations, and almost no one expected to raise interest rates today.
Compared with the January statement, the Fed has placed more emphasis on the moderate growth of the US economy than on the adverse effects of the global situation. However, compared with the dot matrix chart of December last year, the Fed reduced the expected number of interest rate hikes this year from four to two.
The Fed’s latest economic assessment is as follows: Information from the January meeting shows that economic activity has maintained modest growth, although the global economic and financial situation has changed in recent months; household spending has maintained a moderate growth rate, and the real estate sector has further improved, but Fixed investment and net exports are weak. A series of recent indicators, including strong employment growth, point to further strength in the labor market; inflation is still below the longer-term target of 2% of the Federal Reserve, which is related to the decline in energy prices and the decline in non-energy import prices; The market-based salary growth indicator for the month is still low, and the longer-term inflation expectations based on the survey have not changed much overall.
As of the end of the Fed meeting, the latest price of the federal funds futures of the Chicago Mercantile Exchange (CME) showed that the market expects the Fed to raise interest rates today with zero probability. In addition, the market expects a probability of a rate hike in the April meeting of 26.1%, which is about 1/4 of the possibility, while the probability of a rate hike in June is close to 50%.
In addition, in addition to the expected rate hike today, the market currently expects the Fed to raise interest rates only once in 2016. According to the Wall Street Journal, about 76% of economists expect the Fed's next rate hike to be in June this year. Ethan Harris, a global economist at Bank of America Merrill Lynch, said: "The Fed will not have interesting actions today."
He also said that although the US economy maintained moderate growth, the labor market was healthy, and the inflation rate began to rise, the reason why the Fed did not act today is that the global market turmoil in the first seven weeks of this year has "not yet settled."
At the same time as the policy statement is issued, the Fed will also announce its latest forecast for the economy, including a “lattice map” of expectations for future interest rate movements. In addition, at 2:30 in Beijing time, Chairman Yellen will hold a press conference.
The Fed may use the above three communication methods to send the following signals to the financial market: the pace of interest rate hikes this year may still be faster than market pricing. Joseph Lavorgna, chief US economist at Deutsche Bank, believes that the latest dot matrix chart may indicate that there will be three rate hikes this year, which will be lower than the four times shown in the dot chart in December last year, but still significantly more than the current market expectations.
There are also a handful of economists, such as Richard Moody, chief economist at Regions Financial, who predict that the Fed may suggest that the next rate hike may become a reality as soon as the April 26-27 meeting. However, most analysts still believe that the Fed will wait until June this year. Normally, the Fed meets about every six weeks to determine the country's monetary policy.
The main factors that prompted the Fed to raise interest rates in January this year were the global situation and concerns about the US economy. At the time, the market even had concerns that the US economy might fall into recession. Michael Gregory, acting chief economist at BMO Capital Markets, pointed out that the Fed had issued a strong signal in January: once the fog subsided, the interest rate hike would not be delayed.
Gregory believes that since the last meeting in January, the so-called "fog" has actually dissipated, but it is still not enough to put interest rates on the Fed counter today. "This year's statement may point out the risks of the US economy. Basically balanced." In the January statement, Yellen and his colleagues did not mention the bias of economic risks. Gregory said, "So we expect the next rate hike to be in June."
Some economists who believe that no interest rate hike today is a bad choice also point out that it is still estimated that the Fed will not raise interest rates. Tom Porcelli, chief US economist at RBC Capital Markets, said: "The Fed seems to have pushed itself to a corner that will remain inactive in March."
He further pointed out: "If the Fed wants to express some regrets about the possibility of prematurely raising interest rates in March, a necessary practice is that Chairman Yellen made some more hawkish wording at today's press conference. ”

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