U.S. stocks plummet as the Federal Reserve strikes a “hawk”

On December 14, the Federal Reserve raised interest rates by 50 basis points as scheduled at the last interest rate meeting this year, raising the benchmark interest rate to a 15-year high of 4.25%-4.5%, and reiterated that it is “probably” appropriate to continue raising interest rates. The “dot plot” that measures officials’ interest rate opinions will raise the terminal interest rate to 5.1% next year, slightly exceeding market expectations, and predicts that interest rates will remain high and will not be cut until 2024. Federal Reserve Chairman Powell said that there is still some way to go to raise interest rates and will not cut interest rates until he is sure that the inflation rate will move closer to 2%. The market made a hawkish interpretation of this, the dollar and U.S. bond yields rose, and U.S. stocks collectively closed down. | Related reading (China Securities Journal)

Pan Baixuan

The Fed’s action may have caught everyone off guard. The domestic inflation data in the United States has fallen recently, and other economic data seem to be stable. Therefore, people from all walks of life think that the Fed may slow down the pace of raising interest rates. For good reason.

Unexpectedly, although the US inflation data is falling, it is precisely this data that strengthens the Fed’s determination to “accelerate progress” and raise interest rates by 50 basis points. To make matters worse for Wall Street, Powell also announced that he will not cut interest rates until the inflation rate approaches 2%. It has to be said that the current inflation rate is far from 2%. lasts a long time.

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