Next year, the global interest rate will be cut!

1

The hawks in the United States have softened, and the expectation of an interest rate cut this time is basically a sure thing, and it is likely to enter the structure of global interest rate cuts next year.

And the probability of a rate cut next year is as high as 80.8%!

Why?

Let's take a look at a very interesting change.

On December 1, Fed Chairman Jerome Powell publicly opened the hawk, saying that it was too early to discuss interest rate cuts and easing.

To put it bluntly, it is "Lao Tzu is going to raise interest rates!"

But in just the past two weeks, Powell's attitude has changed dramatically, although the Fed announced at its monetary policy meeting on December 13 local time that the target range for interest rates will remain unchanged between 5.25% and 5.5%.

However, Powell seems to have forgotten how he spoke harshly at the beginning of the month, and in his speech after the meeting, he publicly reversed the water, saying that we should discuss it for a while.

Looking back, we don't know what we found, but it must have flashed some people's waists.

This is also seen as an important signal that the US interest rate hike cycle is nearing its end.

In other words, the Fed has not coaxed at this juncture when it wrestled with Mrs. Yellen of the U.S. Treasury Department, but as the hawk with the toughest mouth of the Fed, why did Powell coax it first?

Federal Reserve: The ministers are about to fight to the death, why did the lord surrender first?!

So what happened in the two weeks from December 1 to 12 that caused Powell to make this transition?

2

I think the next one is the most important signal of the expectation of a U.S. interest rate cut, and it is also the key reason for Powell's shift.

On the day of the press conference, the Fed released a report on economic outlook expectations, in addition to Powell's hint of a rate cut.

In this investigation report, there is a very good B, but usually not very "well-known" organization made a wave of speeches.

That's what the FOMC is looking forward to.   

Thirteen of the 19 members of the open market committee have come forward to take a stand.

Among them, 6 believe that the interest rate level may fall to 4.5% to 4.75% next year, 5 expect the rate to fall to 4.75% to 5%, and only 2 believe that the interest rate will remain at the current level next year.

Of the 13 members of the marketing committee, 11 said they would cut interest rates, and the other 2 said they couldn't.

According to the committee's expectations, the Fed will have to cut interest rates almost three times next year at a time of 25 basis points.

So a friend asked, what kind of organization is this "Federal Open Market Committee", and why can he say what it is?

Let me tell you what these bigwigs do.

The committee is a governing body under the Federal Reserve System, whose main task is to determine the monetary policy of the United States, and to achieve a balance between economic growth and price stability through the regulation of monetary policy.

To put it bluntly, it is a certain committee with American characteristics.

But its mandate is not yet the focus of the NB, the focus is on the list of his personnel.

In addition to the seven members of the Federal Reserve Board of Governors, the members of the Marketing Committee also include the presidents of 12 Federal Reserve Banks, including the president of the New York Reserve Bank, who "listens to the tune but does not listen to the announcement".

The seven members of the Federal Council plus the president of the Reserve Bank of New York are the eight members of the Standing Committee of the organization, and then from the remaining 11 reserve bank presidents, four members will take turns to form an enlarged meeting.

These 12 seats not only represent the attitude of the federal treasury, but also directly represent the direct attitude of the capital group of the highest bank in the United States.

It can be said that if the Federal Reserve is the father of other banks and investment banks in the United States, then this market committee is almost the father of the Federal Reserve.

3

It is not only the representative of ZF, but also the will of ZF, official capital and private capital groups.

Now half of such "big daddy" has publicly stated that they expect to cut interest rates, and the impact on Powell and the Fed is unprecedentedly huge.

I've said many times before,

If we want to do policy analysis, then the personality and stance of the decision-maker are very important reference criteria, both ancient and modern, both in China and abroad.

There is an essential difference between the current Powell and the former Yellen.

Yellen was an economist first and then a politician, and for Yellen, politics was her operational tool for economic regulation.

This is called economists engaging in politics.

Powell, on the other hand, is a pure politician first and then the chairman of the Federal Reserve, for whom economic work is an operational tool for his own political gain.

This is called politicians doing the economy.

If Yellen is in office, although the opinions of the marketing committee will also have an impact, it will definitely not be so big, because Yellen's brain is too iron, she really dares to be tough!

The reason why she became the first Fed chair in history to be ineligible for re-election is because she is tough on Trump and unwilling to sacrifice the social economy for political demands.   

Powell, on the other hand, is the key to his ability to sit in this position.

At a time when the contradiction between the federal fiscal expansion and the Fed's liquidity contraction was acute, he was a contractionalist.

But now that the market committee has come out to speak, the most important signal behind it is that the interests of the federal treasury and the Fed bosses are beginning to converge, so it is not surprising that Powell instantly turned from a hawkish dove.

It's not about the economy, it's about the position.

Therefore, the data released by the FedWatch Tool (Chicago Mercantile Exchange Fed Watch Tool) on the second day after the 12th press conference directly showed that the probability of the Fed cutting interest rates in March next year doubled overnight, from 41.3% to 80.8%.

4

The probability of a rate cut next year overnight has formed an overwhelming advantage, and 80.8% is a little bit away from being 9 out of 10.

Why the market committee reached a consensus at this time and began to put pressure on the Fed, the truth is always confusing, and we can only make a few speculations through known objective conditions.

First: the U.S. economy may have had huge problems, but it was previously covered and now has to pivot.

This can be seen from the seats of the market committee, a total of 13 seats expressed their positions, even if assuming that all 7 official seats advocate interest rate cuts, then at least 6 Fed governors also said at the same time that they want to cut interest rates, or can not increase them.

Considering that there are only 12 Reserve Bank seats in the United States, at least half of them have publicly stood up against interest rate hikes.

It can be seen from this that the long-term high interest rate and tightening environment have caused tremendous objective pressure on the US banking industry, which not only comes from the collapse of bank balance sheets, but also may indirectly come from the decline in the ability of the private economy to export profits to the banking industry.   

Second, it may be that the depression situation and asset offset situation in other countries can already solve the problem of economic growth in the United States.

In layman's terms, it's enough to cut.

In the past few years, not only because of the Russian-Ukrainian conflict, Ukraine has sold all its national assets to the United States, but Europe has also been pulled out by the United States.

Argentina has also recently sacrificed its life and is about to mortgage its country to the United States.

So under these conditions, on the one hand, a lot of benefits have been scavenged from Europe through various energy and financial outlets, and on the other hand, the "38th parallel" between Russia and Ukraine may be about to take shape, and Ukraine and Argentina will be able to realize it immediately.

At the same time, the financial war with China was fought for half a year, but it was a defeat for both.

Then at this time, it is obviously more cost-effective to collect European assets and realize Ukraine and Afghanistan than to continue to fight with China.

Third: it may have a lot to do with the approaching elections.

Quoting the Wall Street Journal, the market had too high expectations for interest rate cuts in the first half of this year, and the U.S. Guaranteed Overnight Financing Rate (SOFR) futures (green line) went all the way down, while U.S. President Joe Biden's approval rating (red line) also fell simultaneously;

Beginning in August, SOFR began to skyrocket, and in December, Biden's approval rating began to plummet, at this time, the Fed suddenly changed face, and Powell stopped suppressing interest rate cut expectations at the press conference after the interest rate decision, and SOFR plummeted.

The American people's patience for the era of high interest rates is also on the verge of the limit, with a large number of middle class downgrades, household balance sheets struggling, and politically coupled with Comrade Sichuan Jianguo's "internal and external cooperation", which may directly affect Biden's election situation.

And Biden, as a relatively special president in American history, is the president of the United States who is most likely to be coerced by the Son of Heaven to order the princes, so ensuring that such an old treasure is on it is of great significance to the military alliance, Wall Street, and medical alliance.

5

But these are all America's own family affairs, so what can this strong signal of interest rate cuts mean for us?

Very significant!

In the course of the long period of interest rate hikes in the past, the United States has artificially created a large-scale liquidity crunch around the world, which is clearly not the result of the market's free pricing.

A large number of high-quality assets have actually been artificially reduced in liquidity, thus pushing them into a price trough.

The price is lower than the value, which is called the value depression.

It can be said that the profit curve of global asset investment is a curve that diverges from the mirror image of the US dollar index.

Once the dollar enters a downward channel next year and liquidity begins to re-abundant, global asset prices will inevitably usher in a round of high-speed inflation like a spring.   

This is the certainty of cyclical opportunities, and respecting the cycle is the most important prerequisite for seizing opportunities.

And where is the most cost-effective opportunity at present, and how to seize it?

Curious?

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