Interpretation of cryptocurrency market on Dec 16 2022
After the announcement of the 50 basis point rate hike last night, the market responded with a decline. The 50 basis point rate hike had been expected. The focus was on the follow-up speech by Powell. After the announcement of the rate hike data, the market started to rally at 3:35 am. Powell made some optimistic remarks during the period, such as a "welcome decline" in inflation. At the same time, the economy has maintained moderate growth. But the market was also reminded that the lesson of history is not to relax policy too soon. There are at least 50 basis points to be added next year, and they will be maintained for some time. Next year's rates will also be the peak of the current round of rate hikes.
Overall, the events that took place last night, including the speeches, were almost exactly what the market expected. Whether it was a 50 basis point hike or continued hawkishness, it was all expected. And even though the remarks were hawkish, what was revealed was all positive. For example, the Fed increase in interest rates at the beginning of a sharp, the market generally expected recession and inflation needed to choose one of two. But a year down the road, it temporarily achieved both control inflation economy and continues improving the situation. Because of the lag of monetary policy, the subsequent inflation may see an accelerated decline. A peak next year means the same as telling the market that interest rate increases will stop next year. And the median interest rate of 5.1% next year also determines that the space for rate hikes next year is only 50-100 basis points. Combined with the current situation, the probability is 50%. Stay hawkish just because it's not time to celebrate yet. The Fed will continue to do its job.
The suspense is still left until the first quarter of next year, but the overall trend is already obvious.
Overall, the events that took place last night, including the speeches, were almost exactly what the market expected. Whether it was a 50 basis point hike or continued hawkishness, it was all expected. And even though the remarks were hawkish, what was revealed was all positive. For example, the Fed increase in interest rates at the beginning of a sharp, the market generally expected recession and inflation needed to choose one of two. But a year down the road, it temporarily achieved both control inflation economy and continues improving the situation. Because of the lag of monetary policy, the subsequent inflation may see an accelerated decline. A peak next year means the same as telling the market that interest rate increases will stop next year. And the median interest rate of 5.1% next year also determines that the space for rate hikes next year is only 50-100 basis points. Combined with the current situation, the probability is 50%. Stay hawkish just because it's not time to celebrate yet. The Fed will continue to do its job.
The suspense is still left until the first quarter of next year, but the overall trend is already obvious.