(Seoul = Yonhap Infomax) Reporter Jung Seon-mi = Market Watch quoted FedWatcher on the 22nd that, in contrast to the statement released by the US Federal Reserve (Fed) was quite clear, Chairman Jerome Powell’s press conference was not. US time) reported.
Adam Posen, director of the Peterson Institute for International Economics, said, “The difference between this statement and the February statement is that the communication was very clear.
“Communication is not the strong point of Powell’s team,” Posen points out.
Krishna Guha, vice president of Evercore ISI, said the initial Fed announcement was well received by the market, but “the market turned around when Powell spoke and then fell.”
Market Watch raised four questions that were not resolved even at the Powell press conference.
◇ How serious will the future credit crunch be?
Powell said it was too soon to judge whether serious credit tightening would occur for households and businesses.
“It’s so recent. It’s very difficult because there’s so much uncertainty,” he said.
Westbank’s Scott Anderson said: “After all, it appears that a majority of Federal Open Market Committee (FOMC) participants have assessed that further tightening of bank credit due to financial system instability over the past two weeks is equivalent to a 25 basis point (0.25 percentage point) rate hike by the Fed. “he said.
Ian Shepherdson, chief economist at Fansian Economics, said: “I’m concerned that the risks of an aggressive tightening of credit conditions are quite significant, and in particular, surveys of both borrowers and banks show that lending standards have already been tightening over a year ago. It became clear,” he said.
The Fed looks anxious but not panicked, he said.
Is this rate hike the last?
Powell said Fed officials were uncertain regarding the future path of interest rates. He only emphasized that the Fed “may” increase “some” interest rates.
Analysts said, however, that Powell appears to have left open the door that this might be the last rate hike for the time being.
“If we don’t get surprisingly strong inflation or employment data in the coming months, it’s very likely that this rate hike is the end of this cycle,” the economists at Contingent Macros wrote in a client note.
Bank of America (BofA) economists, however, had a different opinion. They predicted that the final rate would be in the range of 5-5.25% with one additional hike in May.
“The risk inherent in the outlook in this direction is a premature end to the tightening cycle,” said Michael Gafen, an economist at BofA Securities.
The Federal Funds (FF) interest rate futures market evaluated the possibility of a rate cut in May as 50%.
Will interest rates be cut this year?
“A rate cut is not our default outlook,” Powell said.
If you look at the dot plot of the Fed’s rate forecasts, they expect one more rate hike.
Bill Adams, chief economist at Comerica Bank, expects the first rate cut to come between three and nine months.
“For a while, we’ve been speculating the possibility of a first rate cut in September,” he said.
Traders said a first rate cut in July was highly likely.
◇ The biggest lesson Powell learns from the SVB bankruptcy is
Powell looked surprised at the rapid rate depositors were withdrawing from SVB two weeks ago.
“We know that SVB has experienced an unprecedented, rapid, large-scale bank run,” he said. “A very large pool of connected depositors exited incredibly quickly, much faster than previously recorded.”
“The pace of withdrawals is very different from what we’ve seen in the past, but it also suggests that regulatory and oversight needs to change, as they need to adjust to what’s happening now,” Powell said.
smjeong@yna.co.kr
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