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Economist: Will next year raise interest rates four times |



Economists have repeatedly cheered President Fed's speech, Jerome Powell on Wednesday, arguing that the market misunderstood Bauer, and subsequent profits were overreacted.

Bauer, of course, said that the interest rate was "close" neutral, which is clearly different from the one in October (the interest rate is far from neutral), but in fact, these economists believe that Bauer only said the current interest rate is close to "the range "estimated by individual Fed decision-makers, which is between 2.5 and 3.5%.

The difference is crucial and it can be estimated that the Fed will move in that direction.

Tom Porcelli, chief US economist at RBC Capital Markets, said: "Recent markets are sure to misunderstand President Fau, Bauer. The market welcomes his conversation as a dovish attitude, but we believe Bauer does not suggest it. It is said to be close to scope, so will soon stop what Bauer said is only a clear idea. "

Despite this, Bauer's words still scattered the stock market, and Dow grew by 618 points, which helped alleviate the majority of the drop in stake in October in October, but this wave disappeared on Thursday, and the market turned to China and the US -And. All sorts of difficulties, an important index of US stocks closed down.

According to CME's report, FedEx futures trading is currently just emerging, raising interest rates by 25 basis points next month, and then the probability of raising interest rates twice by 2019 is only 29%. (The Fed expects interest rate increases once in December and interest rate increases three times next year)

Porcelli believes this is a misguided look, because according to the previous cycle of raising interest rates, federal rates will eventually rise by 100 basis points or a full percentage above the neutral rate.

"Although the public has said that the Fed was frightened of the stock volatility (which Bauer again denies in today's speech), the Fed's most probable policy paths remain unchanged, and the market price reflects only an increase in interest rates next year, which in turn suggests that the economy is weaker. "

Goldman Sachs and JP Morgan Chase are expected to raise interest rate four times next year

Economic Wall Streets are still insisting on their predictions. Chief Economist Goldman Sachs Jan Hatzius believes that the Fed will raise interest rates four times this year, much higher than the information released by the current FOMC's closely watched substantial interest rate indicator.

When the market thinks Bauer turns to pigeons, Hatzius thinks his speech this time is not much different than the previous one, basically "consistent with the previous remarks".

He pointed out that Bauer emphasized two things, one of the main uncertainties of the neutral interest rate estimate, and the other is that the current interest rate is still lower than the lowest value of the neutral valuation module of the Fed. He repeated the gradual increase in interest rates. This is interpreted as a quarterly rise in interest rates, which is in the middle of raising interest rates too fast or too slow.

Incidentally, JPMorgan Chase also expects interest rates to increase four times next year. Michael Feroli, chief US bank economist, said the market had too much to discuss the differences between Bauer's comments in October and November. "The focus of these two conversations is very obvious, but there is little difference in the text."

In fact, Feroli believes that Bauer basically transfers the same thing twice, ie the Fed is still "far" from the Fed consolidation of 3% neutral interest rates and "close" to the 100 baseline valuation range.
Finally, the Fed is still the most affected by economic developments in the future, such as a government monthly wage bill that does not deal with agricultural products (Feroli expects the report to be strong).

"As far as neutral interest rates are concerned, we think this is very different from the previous commission statement," he warned. "If it is expected that the financial market will stop raising interest rates, it will be a happy result."

Bank of America Merrill Lynch economists also believe that the interpretation of the Bauer market is too many pigeons. They pointed out that the Fed is not sure which neutral interest rate will be and will only see the impact after the interest rate increases.

Ethan Harris, a global economist at Bank of America Merrill Lynch, said, "We believe that he turned from the autumn perspective, emphasizing data dependence and lagging behind the monetary policy, while renouncing the need to promote restrictive areas, and his speech this time being slimmer than in recent a few moments, but we do not think this is still a language. "



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