The Fed wrapped up a two-day meeting with Fed Chairman Jerome Powell announcing another 0.75 percentage point rate hike as policymakers try to cool decades of high inflation. Major stock indexes surged, with the Nasdaq 100 on track for its best one-day gain since November 2020, as Federal Reserve Chairman Jerome Powell spoke at a news conference and suggested the central bank may slow the pace of interest rate hikes. At the same time, the crypto market rallied for a short time, with Bitcoin breaking above $23,000 at one point.
Previously, the market had expected a rate hike, and Powell’s remarks to boost the market and the landing of rate hike boots brought respite to the stock market and the crypto market. A BlackRock strategist said Powell had signaled the Fed was aware of the negative economic impact of its rate hikes, which boosted stocks Wednesday afternoon.
Powell said the Fed is likely to slow the pace of rate hikes in the coming months. No specific guidance will be provided for the September meeting. Another big rate hike is likely, but it will be data-driven and no decision has been made on when to slow rate hikes. At the same time, he doesn't think the U.S. is currently in a recession because so many sectors of the economy are doing too well. But growth is slowing for reasons we understand.
However, in the face of Powell's remarks that boosted the market. Many analysts believe that this is not a buying opportunity for investors. Jack Ablin, chief investment officer at Cresset Capital, said that while all eyes will be on the Fed today, the real show will begin on Aug. 10 when U.S. inflation data is released. We and the market are betting on a weaker number.
Rick Rieder, a managing director at BlackRock and chief investment officer (CIO) of BlackRock Global Fixed Income, told CNBC that he expects the Fed to raise rates by 0.75 percentage point on Wednesday, and there may be two more rate hikes. "I think that means you're going to see 50 basis points in September, they're probably going to do another 25 basis points, I think that's it," he said. "The data says it all, it's about what the Fed does, not what they do." what did they say".
In addition, Ed Moya, senior market analyst at Oanda, said that the time may not be ripe for investors who are eager to buy risk assets and are ready to buy risk assets. There won't be a clear green light to buy risky assets until we see evidence that inflation is falling. Inflation risks will continue to rise due to possible energy shortages, supply chain issues will not ease given the weak global outlook, and issues related to the pandemic remain troubling.
Notably, despite the short-term gains in the crypto market, Tobias Adrian, head of monetary and capital markets at the International Monetary Fund (IMF), warned in a recent interview that the crypto industry could get worse.
Adrian believes that more cryptocurrency projects may fail in the future. It is worth noting that the current cryptocurrency crisis was largely triggered by the downfall of the Terra USD (UST) algorithmic stablecoin, causing the entire ecosystem to collapse. More vulnerable fiat-backed stablecoins could see bank runs in the near future. He specifically cited stablecoin issuer Tether as an example of such a project. Still, Adrian acknowledged that some stablecoins are less vulnerable to such crises. Meanwhile, if the U.S. economy falls into a recession, there will be a sharper sell-off in digital assets.