The Fed raised interest rates by 25 basis points as scheduled, and the spot gold price bottomed out and rebounded to intensify the shock
During the New York session on Wednesday (February 1), at 3 a.m. Beijing time on Thursday, the Federal Reserve announced the latest February interest rate decision. The Fed raised interest rates by 25 basis points as scheduled to 4.50-4.75%, in line with expectations. Judging from the statement of the Fed’s resolution, the Fed’s wording is basically neutral, and the Fed has only made basic revisions to the statement of the previous resolution. Find some clues.
After the announcement of the resolution, the spot gold price bottomed out and rebounded, and the volatility intensified in the space of 8 US dollars.
Figure: Spot gold price in 5 minutes
Figure: US dollar index 5 minutes
Chart: EUR/USD 5 minutes
Chart: USD/JPY 5 minutes
Summary of Fed Decision Statement
In terms of interest rates, the Federal Reserve raised the interest rate on reserve balances from 4.40% to 4.65%, an increase of 25 basis points. Increase the discount rate from 4.50% to 4.75%. The Fed says continued rate hikes are appropriate. (consistent with previous wording) is considering the “magnitude” of future rate hikes.
In terms of monetary policy, the reduction of the balance sheet will continue as planned. The lagged effects of cumulative tightening will be taken into account. In terms of inflation, the Fed said that inflation has eased, but remains high. The Fed reiterated that it is highly concerned about inflation risks.
In terms of the epidemic, the Fed statement deleted the content of the new crown epidemic pandemic and supply chain backup. In terms of employment, the Federal Reserve reiterated that job growth is strong and the unemployment rate remains low.
Fed members unanimously agreed on the interest rate decision. (consistent with last meeting)
Rate changes and market commentary
Changes in interest rates after the Fed decision. U.S. federal funds futures point to about an 85 percent chance the Fed will raise rates by 25 basis points in March, up from about 40 percent previously. After the Fed hiked rates, interest rate futures pointed to a terminal rate of 4.94% for the Fed through June, compared with 4.92% before the Fed hike. The Fed Watch shows that U.S. interest rate futures still reflect expectations of the Fed cutting interest rates this year. The federal funds rate is expected to be 4.486% at the end of December, unchanged from before the Fed’s decision.
“Fed microphone” Nick Timiraos commented on the FOMC statement: The Fed made little change to its forward guidance, and the language of “continuing to raise interest rates” was retained. With the Fed making only the most basic revisions to guidance in its policy statement, all attention will be on Fed Chair Jerome Powell’s press conference on the outlook for interest rates.
Diane Swonk, an analyst at KPMG, commented on the Fed’s interest rate decision.
Analysts comment on the Fed’s interest rate decision. It is very likely that the FOMC policy statement as a group decision, even if policymakers believe that it is possible to cancel the continuous rate hike, revising the wording of “continuing (ongoing) rate hikes” will be too strong. At best there will only be one more rate hike. Again, between now and mid-March, they have plenty of time to shape expectations and react to incoming data.
The market can expect the Fed to raise interest rates again in March and May Analysts comment on the Fed’s interest rate resolution: The Fed’s statement of “continuing (ongoing) interest rate hikes” is a hawkish attitude. That means there will be more than one rate hike ahead, and if Fed officials follow their forward guidance, the market can look forward to another hike in March and May. There has been a heated debate on Wall Street over how to change the language, which would imply a commitment to keep raising rates.
At 3:15 Beijing time, spot gold was quoted at $1926.50 per ounce
