SignalPlus Macro Report: FOMC Special Edition

Dear friends, welcome to the SignalPlus macro research report. SignalPlus macro research reports update macro market information for you every day, and share our observations and opinions on macro trends. Welcome to track and subscribe, and follow the latest market trends with us.

Dear friends, welcome to the SignalPlus macro research report. SignalPlus macro research reports update macro market information for you every day, and share our observations and opinions on macro trends. Welcome to track and subscribe, and follow the latest market trends with us.

Yesterday, the FOMC did its best to keep rates unchanged while again trying to strike a good balance by boosting forward rate forecasts and hawkish rhetoric to achieve "hawks skip rate hikes".

• The relevant points from the statement are as follows:

• The overnight rate was left unchanged at 5.25%.

• The 2023 interest rate forecast was revised up by 50 basis points to 5.6%.

• The 2024 interest rate forecast was revised up by 35 basis points to 4.6%.

• Nine out of 18 FOMC participants expected two rate hikes before the end of the year.

• 3 participants expected more than 2 rate hikes in the next 4 meetings.

• The reference to "additional policy tightening that may be appropriate" was added back to the statement as a sign of further policy tightening.

The core PCE inflation forecast was revised up to 3.9%; the GDP forecast was raised to 1.0% from 0.4%.

As always, the highlight of the meeting came in the ensuing Q&A session, with most of the questions centered on why the Fed decided to keep rates on hold, even though many attendees called for 2 more rate hikes before the end of the year. Some interesting questions and answers are as follows:

• On the positive rate hike in the Economic Forecast Summary:

"Inflationary pressures remain elevated and the process of getting back to 2% is a long way off..."

• Regarding whether the committee reached consensus:

"Almost all FOMC members expect further tightening this year"

• Regarding the terminal rate hike to 5.6%:

Powell said that level was "pretty much in line" with the market level of the fed funds rate before the regional banking crisis in March, "so we're back to that level"

• On whether we're close to where the Fed thinks it's going to stop raising rates:

"I can almost say that the conditions we need to keep inflation down (interest rates sufficiently restrictive) are in place...Growth is significantly below trend...The job market is slowing.... ..the supply chain situation is also improving”On why the Fed decided to do so when some members called for 2 more rate hikes：

• "Skip a rate hike" this monthAccording to Powell, this is a "speed problem

… It is appropriate to slow down, even if it is only a little bit, it is good for [decision-making]. "

• Finally, about their own [lack of] predictive power:

"I wouldn't rely too much on forecasts, [given their inherent] uncertainties"Although the discourse at the meeting was hawkish in character,But the market reaction was much more muted, after all actions speak louder than words, no matter how hawkish the Fed's forecasts sound (and by their own admission they are prone to error), the fact that the Fed has decided to "skip rate hikes" (or pause) amid recent softer inflation data is hard to ignore, so ,

The yield curve has flattened/re-inverted sharply as the bond market continues to bet on a slowing economy and more persistent inflationary pressures against a backdrop of hawkish rates.In equities, the party continued, with a brief intraday decline of around 0.8% ahead of the FOMC statement, thoughS&P 500 ends up flat again as Fed has little market shock. After the uncertainties of CPI and FOMC are ruled out,This Friday's major options expiration (OpEx) could be one of the last big events before the summer break begins

, historically, OpEx returns in June are not very average, but historical experience may not be of much reference here, because call option holders are currently very in-the-money, and institutional investors need to hedge their deltas towards Roll forward (net buying).In terms of cryptocurrencies, BTC is teetering on the edge of $25,000 (-3.8%), while ETH has fallen to $1,650 (-5.8%) after the FOMC. In addition to regulatory FUD, and recent concerns about founder liquidation risks of the CurveFinance protocol (-13%),Registration link: https://t.signalplus.com/competition-okx?locale=zh-CN

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