Home » [Qin Peng Live]U.S. stocks soared after the Fed’s aggressive interest rate hike | You Xikun | Cross-strait | The Fed announced a rate hike

[Qin Peng Live]U.S. stocks soared after the Fed’s aggressive interest rate hike | You Xikun | Cross-strait | The Fed announced a rate hike

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[Qin Peng Live]U.S. stocks soared after the Fed’s aggressive interest rate hike | You Xikun | Cross-strait | The Fed announced a rate hike

[The Epoch Times, June 16, 2022]Hello, viewers and friends, welcome to “Current Events Daily Chat”. Today is June 15th, Eastern Time, and June 16th, Beijing, Hong Kong and Taiwan time.

Today’s focus: The Federal Reserve announced that it will raise interest rates by 0.75 percentage points, and US stocks soared; claiming that “missiles can hit Beijing”, Taiwan’s Legislative President’s remarks have been hotly debated.

The Fed announced today that it will raise interest rates by 75 basis points, and the stock market was driven higher. Where is the U.S. economy headed? Will inflation be contained? If interest rates are raised too heavily and too quickly, will the U.S. economy fall into recession? …let’s talk about it today.

Taiwan Legislative President You Xikun recently pointed out that the “Yunfeng Missile” can hit Beijing. The Taiwan Affairs Office of the People’s Republic of China approved: “If God wants to die, it will make him mad.” There is only one Zhongnanhai option left. Why did Xi Jinping play such a good hand? What’s wrong?

The Fed made a big move today, announcing a sharp three-quarter percentage point hike in interest rates. Federal Reserve Chairman Jerome Powell also said that a similar rate hike in July is likely if economic data does not improve. That sends investors a signal that the Fed is committed to reducing inflation.

Judging from the history of the Fed’s adjustment of benchmark interest rates, this is the largest single rate hike since 1994 in the past 28 years.

1. Market reaction: U.S. stocks rose sharply, and the U.S. dollar index rose for a while.

Stocks pulled back after the Fed announcement, but then jumped. The Nasdaq was up 2.5% today at 11,099 as of the U.S. close; the S&P was up 1.46% and the Dow was up 1%.

Generally speaking, we know that when the Fed raises interest rates, the stock market will fall, so why did the US stock market rise sharply this time?

That’s because investors have been predicting a big rate hike from the Fed, and now Powell’s announcement has brought them a sigh of relief, and their expectations have come true so they don’t have to wait any longer.

The U.S. dollar index hit a multi-decade high of nearly 105.80 at one point, but then fell back to nearly 105.60. However, as of 4 p.m., it was down nearly 0.6% from the opening.

2. The policy statement released by Fed Chairman Powell at the same time was mixed.

The good news: The economy is still hot, and job growth continues to soar. Employment growth has been strong in recent months and the unemployment rate has remained low.

The bad news: Inflation remains high, reflecting the impact on prices due to the coronavirus pandemic, rising energy prices, Russia’s invasion of Ukraine, and more. Lockdowns caused by China’s zero-zero policy could also exacerbate supply chain disruptions.

3. Why increase the rate hike now? Powell acknowledged failure to manage prices.

The Fed had expected a half-point rate hike last month, which would help lower inflation to some extent. However, the truth is that May’s CPI showed US inflation rising to a 40-year high of 8.6%, beating all expectations and broadly higher across sectors.

Meanwhile, consumer confidence fell to an all-time low. Data released last Friday (June 10) showed that the University of Michigan consumer confidence index fell to 50.2 in June from 58.4 in May. The figure was weaker than expectations of all economists polled by Bloomberg, with a median forecast of 58.1.

The Fed’s statement over the past few months has been this line: “We believe that effective and appropriate monetary policy alone can produce a 2% inflation outcome with a strong labor market.”

But now they removed it. That means the Fed is making an important but accurate acknowledgment: inflation is not entirely within its control. This amounts to an admission that their forecasts in the past were wrong and that the use of monetary policy was insufficient.

“A large part of it really isn’t monetary policy,” Fed Chairman Jerome Powell said at a news conference. “It didn’t seem appropriate, so we removed that sentence.”

4. Discussion: Will it accelerate the U.S. recession or trigger stagflation?

Powell said the central bank is mindful of the dangers of raising rates too far, too quickly — a move some economists say could tip the U.S. economy into recession.

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But Powell said he has a more pressing concern: losing control over prices. “We had to restore price stability. We did, because it’s the bedrock of the economy.”

Powell said the economy would not function properly without price stability.

“It’s not working for people,” he said. “Their wages are going to be eaten up, so we’re going to get the job done.”

5. Will the economy hit a hard landing? Powell: Avoiding a recession is not easy, a soft landing may not be possible.

The biggest question economists have about the Fed’s aggressive action on inflation is the central bank’s ability to raise interest rates without tipping the U.S. economy into recession.

Federal Reserve Chairman Jerome Powell has declared that he has been bullish on the chances of a so-called soft landing. But, right now, he’s not so sure.

He said the odds of a soft landing were waning due to factors beyond his control, including Russia’s invasion of Ukraine, the coronavirus pandemic and a tightening of supply chains.

“Can we still do it? There’s a bigger chance now depending on factors beyond our control, namely, (market) volatility and spikes and commodity prices, which may ultimately take us out of options,” Powell said. “So we just don’t know.”

6. The very surprising pigeon: one of the toughest hawks

Today’s Fed vote was 10:1, and the only person who opposed raising rates by 0.75 percentage points surprised the outside world was Kansas City Fed President Esther L. George. And the reason for her objection was not because she wanted a higher interest rate hike.

George often finds herself referred to as one of the more hawkish members of the Fed because she is typically more worried about inflation than the Fed’s so-called dovish counterparts, who tend to lower interest rates to keep the job market healthy.

But according to Wednesday’s statement, George apparently preferred to raise rates by half a percentage point, or 50 basis points.

The move was a bit unexpected. But George recently hinted that she may be willing to slow the pace of rate hikes. In a speech in May, she noted that the Fed was preparing to shrink its massive balance sheet, a move known as quantitative tightening, and that “financial markets are now more volatile than they were in 2017.”

7. Impact on the U.S. economy: Job damage, but recession likely to be mild

The Fed now expects the U.S. unemployment rate to rise modestly to 3.7% this year (3.6% now). The Fed forecasts that the unemployment rate will rise to 3.9% next year and reach 4.1% in 2024.

All of these expectations were higher than the Fed’s March expectations. Earlier this spring, the Fed projected the unemployment rate would remain at 3.5% this year and next, rising to 3.6% in 2024. The Fed does not expect to have to raise the target rate by 1 and 25 basis points since then.

Economic growth will decelerate. The Fed expects U.S. GDP to grow 1.7% this year and 2023. It also forecasts that U.S. GDP will grow by 1.9% in 2024.

Wall Street economists made similar predictions.

Economists Jay Bryson wrote in a note that a mild recession expected but not guaranteed is likely to resemble what the U.S. economy saw in 1990-1991. At the time, the contraction lasted for two quarters, and real GDP fell 1.4% from peak to trough, Bryson wrote.

“Since the end of World War II, the United States has experienced 12 recessions,” he wrote. “On average, these recessions have lasted four quarters, with real GDP contracting by 2.7% from peak to trough. Therefore, our projected recession will be It was one of the milder recessions after World War II.”

He compared the 2008 financial crisis, which many feared, and said this time won’t be as severe as the last two recessions (2007-2009 and 2020), both of which were “scarred things.” .

“With many fundamentals of the economy generally sound right now (namely, household and business balance sheets are generally healthy, and the banking system is well-capitalized), we believe a mild and relatively short recession is more likely than a deep one.”

8. In addition to the Fed raising interest rates, is there any way to curb prices?

The Fed has promised to keep prices in check, but not this year. It forecasts inflation to hit 5.2% this year, with inflation returning to normal as early as next year. It now expects PCE inflation in 2023 to be 2.6% higher than this year’s prices, down slightly from its March forecast of 2.7%. The Fed now sees inflation falling to 2.2% by 2024, from the 2.3% forecast in March.

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However, in the video on June 9, I commented on the joint action of the Biden administration and the G7 allies to curb oil prices, saying that that would not solve the problem, what the U.S. government should really do, It is to take four actions to reduce oil prices, including:
The first and most important thing is to lift restrictions on oil exploration in the United States. The U.S. government can also consider subsidizing the production of oil in the United States. In this way, the United States will achieve self-sufficiency in oil, and will also export significantly, reducing international oil prices. Second, stop massive fiscal stimulus. Third, reverse other policies that lead to inflation. For example, the removal of tariffs on Canadian lumber, as well as tariffs on other building materials. Avoid expensive new environmental regulations, and more. Fourth, clear the shipping backlog at U.S. ports.

Similarly, for the current rate cut by the Federal Reserve, this separate monetary policy change, I also believe that the symptoms are not cured, and the United States will bear the inflationary pressure for a longer time and pay the price of a recession, even if the recession is mild.

You Xikun “Missiles can hit Beijing” The reason why the CCP lost Taiwan’s good card

The speech of Taiwan Legislative President You Xikun has sparked heated discussions on both sides of the Taiwan Strait. Judging from the reactions of different camps, the CCP is continuing to rapidly lose the support of all parties in Taiwan.

On June 12, You Xikun mentioned in a video speech that the Yunfeng missile developed by Taiwan can already hit Beijing, and the CCP must think twice before it really invades Taiwan. He said that the CCP is pursuing global hegemony, and the nature of its aggression has not changed. Taiwan should not think that it will not start a war. He also said that global democracies should help Taiwan in defense, and must have a “strategic clarity” to let the CCP know that attacking Taiwan is an enemy of the United States, Japan, Australia, India and other countries, and it must pay a high price to prevent it from using force.

He also said that in the world military ranking in 2022, it will be very difficult for Russia, the second-ranked, to beat Ukraine, which ranks 22. It is not so easy for the CCP to beat the 21st-ranked Taiwan. What’s more, Taiwan’s defense advantages and natural dangers in the strait.

He said, “When I was the chief executive, I knew a little that the Yunfeng missile had already been mass-produced. I know part of it, but I can’t say it. According to media reports, it is already possible to attack Beijing. ), we are not like Chiang Kai-shek who want to counterattack the mainland, . . . , Taiwan will not attack Beijing, Shanghai, and the Three Gorges, but with this ability, if China (communist) wants to attack Taiwan, we must consider that we have the ability to attack Beijing.”

You Xikun’s remarks aroused reactions from the CCP and various parties in Taiwan.

The Taiwan Affairs Office of the Communist Party of China claimed that there is an old saying in China: “If the sky wants to die, it will make him mad.” “The rhetoric of ‘Taiwan independence’ die-hards like You Xikun once again exposed their maddened nature. If they dare to hit the stone with an egg, they will surely be hastened demise”.

Of course, the CCP will only shout like this. What is really worth noting is the actual range of the Yunfeng missile and the reaction of the Kuomintang. In this regard, we see very interesting.

First of all, is the Yunfeng missile really able to hit Beijing? According to previous media reports, this medium-range cruise missile developed by the Republic of China has been developed under the tenures of President Lee Teng-hui, Chen Shui-bian, Ma Ying-jeou, and Tsai Ing-wen, and has a range of 2,000 kilometers. . Now, it has been further confirmed by the mouth of the President of the Legislative Assembly, You Xikun.

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Secondly, on the Kuomintang side, legislator Wen Yuxia said that she hoped that the two sides of the strait would not use words to intensify each other and deepen confrontation. “Our national defense still has to continue research and development. He can say that the missiles we developed can reach hundreds of kilometers, and the target is correct. Don’t say that I can hit your home.”

What does this mean? This means that Taiwan should do more and talk less, and the CCP is outside Taiwan. In this regard, in fact, there is no obvious difference from the Democratic Progressive Party.

This reminds me of a recent big move of the Kuomintang. From June 2 to June 12, Kuomintang Chairman Zhu Lilun visited the United States to list the Kuomintang’s office in Washington, and repeatedly challenged the CCP’s bottom line, such as saying The Kuomintang is a pro-American, not pro-China party, which is interpreted as pro-American and anti-Communist, and also calls the 1992 Consensus “Non-Consensus Consensus”.

Although some opponents say that Zhu Lilun’s trip to the United States is the result of “three nos”: the Kuomintang ignores it, the United States does not believe it, and Beijing is unhappy, but in fact, the Kuomintang thanks Zhu Lilun and believes that he has reduced the interference of the election campaign at the end of the year.

On the CCP side, it is not simply “unhappy”, but rather angry. Hu Xijin, the former editor-in-chief of the Global Times, criticized the Kuomintang as “a century-old rotten party.” Jiang Wanan, one of the representatives of the Kuomintang, responded that he would not shrink from the pressure on the other side. . This actually reflects the desire of voices within the Kuomintang to change their weak attitude towards the CCP in the past.

This high-profile announcement of the KMT’s policy toward the CCP is a sign of a major turning point: it means that Taiwan is more and more like the United States and other democratic countries. Although there are huge differences in internal policies, their policies toward China are basically the same. At the same time, this also means that the CCP’s policy of dividing Taiwan in the past has suffered a heavy blow.

In addition to the U-turn in Sino-US relations, there are several reasons for this:

First, the CCP tore off the mask of the “1992 Consensus”. At the beginning of 2019, Xi Jinping directly stated that the so-called “1992 Consensus” was “one country, two systems”. Therefore, whoever dares to publicly adhere to the “1992 Consensus” is equivalent to running counter to Taiwan’s public opinion and committing suicide politically;

Second, the CCP’s crackdown on Hong Kong shows that “one country, two systems” is a complete party, away from the rule of law and democratization;

Third, the CCP is increasingly disdainful of peaceful reunification. Instead, for the CCP’s ambition to occupy Taiwan by force, it keeps showing off its might, which also makes the people on the island of Taiwan more and more dissatisfied;

Fourth, the CCP supports Russia’s invasion, which further exposes that the CCP is a destroyer of international rules and international peace, so of course the CCP does not care about destroying Taiwan;

Fifth, remarks such as robbing TSMC have exposed the fearless face of the CCP’s lawlessness and ignorance.

In the past few days, I have seen some pro-CCP media and some CCP scholars talking about abandoning the century-old Kuomintang party and supporting other parties in Taiwan. Will be the real master of the house in Taiwan. On the surface, it seems that the CCP is continuing to play conspiracies and treating the people of Taiwan as fools, but in fact it only shows that the CCP is running out of skills.

This also means that the CCP has only one option left for the Taiwan issue: to invade Taiwan by force.

However, with the CCP’s corruption in governing the military and increasingly severe international high-tech sanctions and containment, will the CCP still have the strength to realize its ambitions through force? Taking a step back, does Xi Jinping, who has no military foundation and relies on frequent changes of generals and high pressure to maintain military power, really dare to attack Taiwan in the near future?

“Qin Peng Live” Production Team

Responsible editor: Li Hao#

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