Events
At 2 a.m. Beijing time on April 7, the Federal Reserve released the minutes of its March meeting. According to the minutes of the meeting, many Fed officials attending the meeting believe that if the inflationary pressure in the future fails to ease, it may be appropriate to raise interest rates by 50 basis points or more at that time. In addition, participants generally believed that the Federal Reserve would start to reduce its balance sheet after the interest rate meeting in May, and would reduce its balance sheet at a rate of up to $95 billion a month, including $60 billion of treasury bonds and $35 billion of institutional bonds.
Comments
The Fed raised interest rates for the first time and did not significantly improve inflation. After the interest rate meeting in March, the Federal Open Market Committee (FOMC) announced to raise the benchmark interest rate by 25 basis points to 0.25% to 0.50%. The Fed raised interest rates for the first time. However, according to the latest data, the Fed's 25 basis point interest rate hike has not significantly improved the current situation of inflation in the United States, which is deteriorating. The latest data released by the U.S. Department of labor showed that the average hourly salary increased by 0.4% in March and the average hourly salary increased by 5.6% annually. The continuous rise of wages has exacerbated the production pressure of enterprises, thus increasing the price pressure of commodities. In addition, the higher price of oil based commodities has further worsened the inflation situation in the United States. In March, the US oil contract in May 2022 increased by 5.73% and the oil distribution contract in June 2022 increased by 7.84%. On the whole, the imbalance between commodity supply and demand and the rise in energy prices will still increase the price pressure of commodities. At present, the inflation value of the United States has far exceeded the 2% target previously set by the Federal Reserve. If the Fed still wants to achieve the goal of controlling inflation within a reasonable range within this year, or implement more aggressive monetary policy.
The strong resilience of the U.S. economy and the strong recovery of the labor market supported the Federal Reserve to raise interest rates many times and accelerate the pace of table contraction during the year. According to the latest data released by the U.S. Department of labor, 490000 non-agricultural employees were added in March, and the number of employees increased by more than 400000 for the 11th consecutive month; The unemployment rate fell to 3.6% in March, the lowest since February 2020. On the whole, the US economy has strong resilience. With the continuous recovery of US manufacturing and service industries, the Fed's first interest rate hike did not affect the recovery momentum of the labor market. However, it should be noted that the inflationary pressure in the United States is still large at this stage, which has brought downward pressure to economic development. There is still great uncertainty about how the Federal Reserve will balance economic development and curb inflation.
The inflationary pressure cannot be alleviated in the short term, or ushered in an inflection point in the third quarter. Considering that the impact of labor shortage, supply chain bottleneck and rising commodity prices may last for a long time, the inflationary pressure in the United States is affected by many internal and external factors and cannot subside in the short term. However, according to the minutes of this interest rate meeting, with the rise of inflation, the Federal Reserve considers accelerating the pace of tightening monetary policy after the interest rate meeting in May, increasing the scale of interest rate increase and accelerating the pace of reducing bond purchase, so as to effectively curb the upward trend of inflation. In addition, considering the easing of the conflict between Russia and Ukraine and the impact of the accelerated release of crude oil reserves by the International Energy Agency, or supporting crude oil supply and promoting the rational return of crude oil prices, US inflation may usher in an inflection point in the third quarter.
Risk tip: the economic growth is lower than expected, the spread of trade protectionism, and the Fed's policy is higher than expected.
