Fed’s economic outlook revised… Up to 6% of GDP, 4.8% of unemployment rate, 2% of inflation rate [김영필의 3분 월스트리트]

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On the 16th (local time), the 10-year Treasury bond yield once jumped to more than 1.6% per year. Of course, it was a burden on the stock market. The Mayor’s attention is focused on the data to be released after the Federal Open Market Committee (FOMC) meeting on the 17th and the mouth of Jerome Powell, Chairman of the Federal Reserve System (Fed).

Yesterday’s’Three Minute Wall Street’ outlined the overall FOMC results and key points. On this day too, many prospects came out from Wall Street. It is the same as the day before. As the interest of many people is great, let’s focus on updated or new content.

The day before, the Fed informed me that there is a high possibility that there will be no policy change at this FOMC. On the same day, the Wall Street Journal (WSJ) said, “The Fed will comment on the improvement of the economic outlook and emphasize that it is still too early to change interest rates or bond buying plans.”

However, this will be a concern for the Fed. I have to talk in a way that says, “The situation is getting better, but we will stay the same.” You will be rushing. Of course, the Fed faces this situation often, but this time, the market is very sensitive as concerns over inflation and rising interest rates overlap.

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This will embarrass Chairman Powell in that there is a very high possibility that the economic outlook that will come out this day will improve. “The Fed will increase its growth prospects,” said Diane Swongk, senior economist at Grant Thornton. We know it.”

Bank of America (BofA) raised the Fed’s gross domestic product (GDP) this year by at least 1.5 percentage points from the previous forecast to 5.7-6.0%, the unemployment rate down to 4.8%, and inflation is the Fed’s target 2 I estimated that it can be adjusted to the% level. The accuracy of the numbers is also important, but it is more important to understand that the forecasts for tomorrow are roughly this level. The data tells us that austerity and interest rate hikes are approaching, but Powell is in a situation where he is still far away. How the market interprets it is key.

In this regard, Fed-born Yale professor Bill English said, “Basically everything is a little better at FOMC, but there is still a lot of uncertainty and we’ll be told that we’re not going to do anything soon. I am sure of that.” “The Fed wants to know that the situation is better. But they don’t want to announce that they will change their policies soon. That’s why it’s tricky.” You must use the fluid escape method as described earlier.

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As for the Fed’s move, it is worth noting that the Fed will raise interest rates or reduce quantitative easing (QE) only after a number that corresponds to the policy objectives it is thinking of comes out. This is why Chairman Powell said that we do not look at prospects and make policies, but report results. In other words, there is still more time left.

There are still disagreements as to whether this will be a direct hit in the stock market. This is because a rise in interest rates can be a sign of an economic recovery, and companies’ performance can improve.

Anyway, some of the economic figures released today seem to play a role in giving the Fed a little bit of time. During the heavy snowfall, retail sales in February decreased 3% compared to the previous month. Industrial production in February also shrank by 2.2% compared to January.

However, this is only a short time, and consumption will increase rapidly from spring. According to JPMorgan Chase, card usage, which fell in February, increased again in early March. Here’s a cash payment of $1,400 per person. As consumption increases, so does production. WSJ recently released an article titled “Factory is not meeting demand.”

Wall Street is reacting fast. According to CNBC’s’Fed Survey’, a survey conducted by CNBC’s economists, market experts say that the first rate hike is in November 2022 and the decline in bond purchases is in November this year.

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Citigroup also predicts that there will be rate hikes in the second half of 2022 and 2023. The current Fed’s dot plot shows that there will be no rate hikes until 2023 and throughout 2023. The tightening clock is getting faster and faster.

“No one knows exactly how long the Fed will be comfortable with how high levels of inflation,” the WSJ said. “Market uncertainty is growing as some experts believe it can move faster than the Fed has suggested.” “Chairman Powell and his colleagues have not yet expressed’concern’ over the increase in Treasury yields,” he said. “After FOMC, his communication will be taken as prudent.”

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/New York = Correspondent Kim Young-pil [email protected]

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