MORE RATE HIKES Coming?! Everything That The Fed Said!!

The FED has finally paused or has it After over a year of raising rates the World's largest Central Bank has pumped The brakes the result has been a rally Across most asset classes but it might Be too soon to celebrate that's because Fed officials project two more rate Hikes by the end of the year and fed Chairman Jerome Powell made some scary Statements during his recent press Conference statements that foreshadow More Market pain today I'm going to Bring you up to speed on what's been Going on at the FED summarize what Jerome said at the recent press Conference and tell you exactly what it Could mean for the markets Let's start with a quick recap since Last spring central banks around the World have been raising interest rates To fight inflation the FED first Signaled that it would begin raising Rates in the Autumn of 2021 and the Markets started to fall This is because investors are Forward-looking markets price in the Future The markets collapsed last summer when Inflation hit its peak because investors Knew that it meant more rate hikes would Follow the markets then started to Recover last Autumn because inflation Had started to come down investors knew That the fed's rate hiking cycle would

Soon be coming to an end Earlier this year the market started to Rally this was due to a combination of Expectations that the FED would stop Raising rates the market being flooded With liquidity coming from the treasury General account or TGA as a result of The debt ceiling being reached and a Short squeeze in tech stocks in the Spring expectations that the FED would Stop raising rates increased because of The banking crisis the markets Experienced more inflows from the TGA Because of tax revenues being spent in The economy Tech stocks also exploded because of the AI boom this all caused the markets to Rally even more The exception was the crypto Market Which decoupled from stocks to the Downside this was because of crypto Specific factors such as unreasonable Regulations in the US which have made Institutional investors uncomfortable Investing directly into the crypto Market thankfully this is starting to Change and speaking of decoupling the Headline CPI the inflation measure that Includes food and energy has continued To come down sharply and currently sits At around four percent However for CPI the inflation measure That excludes food and energy is still Stuck at around 5.3 percent

For context the FED targets an inflation Rate of 2 and pays close attention to Core CPI core CPI being more than double The fed's target therefore implies that The FED will continue to raise rates Contrary to current investor Expectations now don't get me wrong the Headline CPI is still important but only Insofar as it drives inflation Expectations if the average person sees That headline inflation is coming down They'll act in ways that continue to Bring it down or so it's believed Meanwhile the pce the fed's preferred Inflation measure after falling for Months has started to rise the pce has Bounced back up to 4.4 percent from 4.2 Percent this Resurgence of inflation is Concerning for the fed and further Underscores the likelihood of more rate Hikes if you watched our video about the Debt ceiling deal you'll know that the US government also passed a deal to Raise the debt ceiling on the 1st of June this means that the TGA is now Being refilled and this could suck up to A trillion dollars out of the markets in The coming months a potential headwind For stocks But as of earlier this month stocks are Technically in a bull market this is Because major indices have risen by 20 Percent now the caveat there is that Most of these gains have come from tech

Stocks some of which have been hitting All-time highs the lack of broader stock Participation has some investors Cautious at the same time unemployment Has started to tick up it recently Rose From 3.4 to 3.7 percent now for Reference the FED targets a four percent Unemployment rate as part of its dual Mandate the other part being that two Percent inflation if unemployment Continues to rise it could mean a Recession and a difficult decision for The Fed It was against this backdrop that Jerome Took the stage last Wednesday for the Fed's post-meeting press conference it's Important to point out that the FED also Published a summary of economic Projections or SCP now an SCP is Provided after every other fed meeting And shortly before the fed's press Conference it appears that the markets Dipped when the SCP was released and This is probably because these so-called Dot Plot revealed that most fed Officials see interest rates Rising by Another 0.5 percent or 50 basis points By the end of the year this was a Revision hire compared with the previous SCP a surprise oddly enough the market Started to recover when Jerome began his Opening speech this was odd because Jerome's speech was hawkish indicative Of further rate hikes he started by

Saying that the FED is committed to Bringing inflation back down to its two Percent Target he then acknowledged that It has raised interest rates Significantly over the last year and has Also been selling assets from its Balance sheet which has the Practical Effect of raising interest rates or so It's believed Jerome acknowledged that It takes some time for these rate hikes To be felt by the economy as such the FED decided not to raise interest rates For now In the same breath however Jerome Pointed to the SCP and said that most Fed officials believe that more rate Hikes will be appropriate later this Year he also added that the FED will Continue to draw down its balance sheet At de facto rate hike Jerome went on to Say that the FED expects the economy to Struggle because of higher interest Rates and that the labor market remains Strong despite some softening Jerome Said that the FED expects unemployment To hit 4.1 percent this year and 4.5 Next year a change which historically Means a recession not surprisingly Jerome cited the CPI for CPI pce and Core pce figures as the reasons why the FED needs to keep raising interest rates They are all above the 2 Target the Silver Lining Jerome said is that Inflation expectations remain quote well

Anchored you can thank the CPI for that After reiterating that it will take time For rate hikes to affect the economy Jerome said that it's still unclear Whether credit tightening will affect The fed's decisions for those unfamiliar It's believed that banks will reduce Their lending because of the recent Banking crisis causing more economic Stress more about that in the Description I digress Now Jerome concluded by saying that if The fed's forecasts in the SCP are Correct then there will be at least two More rate hikes by the end of the year He underscored the fact that the Interest rate the FED forecasts at the End of the year is higher than what it Was in the March SCP a hawkish change Even so Jerome also underscored the fact That the FED will ultimately make its Decisions based on incoming economic Data key dates to watch there are the 30th of June for the pce 7th of July for The unemployment data 12th of July for The CPI and 26th of July for the next Fed meeting take note Now once Jerome's speech was finished The question period began the first Reported asked questions was from the Financial times they asked Jerome why The FED is pausing given that markets Are rallying and the economy appears Strong Jerome said that the focus of the

FED right now is just keeping rates High The second question was from Reuters Their reporter asked about the fed's Economic projections in the June SCP Which notes a stronger economy and lower Unemployment than the March SCP Jerome Said that the data has come in stronger Than expected hence the rate hike Projections he then said something Concerning and that's that the FED is Only seeing the early signs of Disinflation he specified that they want To see growth below a trend and a rise In unemployment in other words a Recession Jerome also implied that there are still Problems with Global Supply chains now The third reporter to ask questions was From the Wall Street Journal and in this Case you need to know his name Nick Timurass Nick is colloquially referred to as the FED Whisperer As far as I understand this is because He has exclusive access to the FED that Other reporters don't have for well Whatever reason Nick asked Jerome why the FED didn't Raise rates given that it plans on doing So later why not rip off the Band-Aid in Other words Jerome explained that it's Primarily because the FED doesn't know How the banking crisis will affect Credit conditions he then said the FED

Will skip but that he shouldn't call it A skip Fed Insider Danielle demartino Booth Explained in a subsequent interview that The reason why Jerome didn't want to Call it a skip is because it commits the FED to raising rates again in July lo And behold investors are currently Pricing in a very high probability of Another 25 basis point rate hike in July On that note Nick followed up by asking How much data the FED needs to see Before it can decide whether it's going To truly pause or just skip Jerome Revealed that the FED needs to see three Months of economic data to make this Decision which could mean that there Will be another pause in July Since investors are currently pricing in Another rate hike a pause could result In a rally take note Now the next question was from the New York Times the reporter asked Jerome why The FED thinks the economy will be Resilient and whether it's possible that The FED will raise rates even higher Than the SCP projects Jerome said it's Because of unemployment and that the FED Will be data driven in other words yes It's possible that the FED will raise Rates even higher than the SCP projects CNBC was next and their reporter asked Jerome what the balance of risks are Inflation versus unemployment they also

Asked how high the FED needs to go To the former Jerome said the risk of Not raising enough is greater than Raising too much as for the latter he Didn't say he did make another Concerning comment however and that's That the FED quote hasn't seen Convincing evidence that core inflation Has topped out now this is significant Because it implies that the FED believes Core inflation could see a Resurgence And it won't be coming down anytime soon Yikes anyways the sixth reporter to ask Questions was from The Washington Post They asked Jerome how long it takes for Interest rates to take effect and if There has been any credit tightening After the banking crisis Jerome didn't give a clear answer about The lags and said there's no signs of Credit tightening as a fun fact it's Believed that it takes between 12 and 18 Months for interest rates to affect the Economy This is because it takes lots of time For debt to come due or to be refinanced As for the credit tightening this also Operates with a lag it could take months Before we see it come up in the data the Associated presses reporter was next up They asked Jerome why the FED still Wants to raise rates if inflation is Coming down albeit slowly Jerome said That inflation has been high for two and

A half years everyone keeps saying it Will come down but core inflation is Still stuck He added that the FED wants to see core Inflation come down quote convincingly Before it makes any changes to its Monetary policy he also added that the FED wants to do things with minimal Damage to the economy laughable Considering he's been explicit in his Desire to see the opposite The eighth reporter to ask questions was From Bloomberg they said that everyone Knows the FED doesn't like to surprise Markets and basically asked how the FED Will guide investor expectations in the Coming months Jerome's answer here was extremely Concerning so listen closely Jerome confirmed that the FED doesn't Want to surprise the market but that it Needs to meet its dual mandate and that The next fed meeting will be quote live More importantly he added that quote Markets will have to make a judgment After the fed's next interest rate Decision now call me crazy but it sounds Like the FED is planning on surprising The markets in July admittedly this Could be a surprise to the upside a Pause instead of a hike like I mentioned Earlier Danielle noted in her Aforementioned interview that live means The FED will make a last minute decision

On rates Still this doesn't explain the ominous Comment about the markets what judgment Will they have to make exactly if you Have any good guesses I'd love to see Them so drop a comment down below anywho Politico's reporter was next up and Asked Jerome about the TGA refill and Its effects on the fed's policy Jerome Revealed that treasury secretary Janet Yellen has been coordinating with Market Participants to ensure the liquidity Drain is minimally disruptive to markets This is good news because it means that The liquidity drain from the TGA refill May not be as severe as many had feared The bad news is that Jerome still seems To be concerned he said that the FED Will be closely monitoring market Conditions as the TGA is refilled Especially money market funds if you Watched our aforementioned video about The debt ceiling you'll note that it's Possible money market funds could Experience issues as a result of the TGA Refill if this happens it could cause Problems for some stablecoin issuers now The Politico reporter followed up with a Question about the housing market Believe it or not but Jerome said that The housing market quote seems to have Put in a bottom he probably meant a Local bottom since he added that it will Take time for the effects of interest

Rates to be felt otherwise it means that The housing market is going to resume Its rally good news for homeowners bad News for home buyers The 10th reporter to ask questions was From Fox Business they asked Jerome the Same question they always do and that's Whether the FED ever speaks with the Treasury about fiscal policy government Spending Jerome answered no for the Millionth time but some are saying that He should that's because inflation won't Come down if the government keeps Spending regardless of how much the FED Raises rates Some believe that inflation could get so Bad that the FED will have to tell the U.S government to stop spending Something that's apparently already Happening in Europe with the ECB Next up axios's reporter asked Jerome if It's still possible to have a soft Landing that is bring inflation back Down without a recession With a loud sigh Jerome said that it's Theoretically possible but stressed that The FED will get inflation back down to Two percent no matter what brace for Impact In all seriousness the axios reporter Followed up with a cutting question and That's how the FED can say it will do Whatever it takes to bring inflation Back down when it projects rate Cuts

Next year while inflation is still above The two percent Target Jerome explained that interest rates Will follow inflation down then after an Irrelevant and almost unintelligible Question from a reporter at AFP a French News company a reporter from Barron's Asked Jerome how high rents are factored Into the fed's monetary policy Jerome Explained that rent is one-third of CPI And half of pce so it's a very important Factor the FED looks at Jerome was Careful not to put too much weight on The importance of rent probably because It's one of the last things in the Inflation basket to come down he then Pivoted to talking about core inflation Figures and repeated that there hasn't Been much progress he also highlighted The Resurgence in pce next came a Question from MarketWatch their reporter Asked Jerome about whether the FED is Factoring in employee wages as part of Its decisions Jerome revealed that the FED wasn't watching wages that much when It started raise rates but that it is Watching wages closely now this is Significant because of the wage price Spiral and economic theory which posits That higher wages mean that people can Afford higher prices which causes higher Wages which causes higher prices and so On the only solution to this spiral is To break it by raising unemployment the

More you know Now the final reporter to ask questions Was from bank rate they asked Jerome About banking crisis risks commercial Real estate risks and risks in the Shadow banking sector which includes Money market funds by the way They asked Jerome if raising interest Rates will increase these three risks Regarding commercial real estate risks Jerome admitted that these will be Around for some time and that some small Banks could go down as a result he Stressed that he doesn't believe it'll Be a big event where everything falls Apart at once but I suppose you never Really know more about the commercial Real estate crisis using the link in the Description moving on regarding Shadow Banking meanwhile Jerome said that risks Arose during the market panic at the Start of the pandemic and seemed to make A subtle reference to money market funds FYI money market funds experience Significant stress during the march 2020 Crash and also during the 2008 financial Crisis what's strange is that Jerome Said that the shadow banking sector Isn't the fed's problem their focus is The actual banking system regarding the Banking crisis Jerome said something Equally strange and that that quote it's Hard to identify something that we don't Worry about call me crazy but it sounds

Like Jerome is saying that the FED is Worried about the banks then again he Could have just been fumbling with his Words he is 70 years old after all and Had had a long day Regarding raising interest rates Jerome Said that the FED will be closely Monitoring developments in the markets And the banking sector just before he Walked off the stage he quickly said That the FED also must maintain Financial stability truly scary but Perhaps bullish because it likely means Money printing So what does all this mean for the Markets well the short answer is that it All depends on the incoming data the key Takeaway is that the FED is data driven If inflation stays High it will continue To hike and it won't Flinch until Unemployment turns into a meme stock The only wild card in this equation is a Threat to financial stability a card That Jerome flashed half a dozen times During the press conference it's not Entirely clear where this threat would Come from all signs seem to point to Money market funds but we're honestly Not sure what the mechanism would be in Case you're wondering money market funds Are effectively stable coins in Trad Five they're Investments That maintain a One dollar Peg and are backed by liquid Securities mostly short-term U.S

Government debt and repos The difference is that money market Funds share the yield from these Securities stable coins do not the Similarity is that if there's an issue With the collateral then a money market Fund could depeg or as Trend five folks Say break the buck the only way this Would happen is if there's an issue in The market for short-term U.S government Debt which is unlikely given that it's Extremely liquid easy to buy and sell in Theory excessive issuance of short-term U.S government debt to refill the TGA Could reduce this liquidity and cause Issues for money market funds in Practice however the treasury is Coordinating with money market funds and Other buyers to make sure this doesn't Happen as per Jerome's comments If the threat to financial stability Won't come from money market funds that Leaves the banking sector and the Commercial real estate sector the thing Is that both risk factors are well known And are being well monitored From an investor perspective both Factors have also been priced in forward Looking It's possible that the threat to U.S Financial stability could come from Overseas given how interconnected the Global economy is the threat to Financial stability could also be

Geopolitical in nature not economic There's no shortage of tensions between China and the US these days never mind Russia and Ukraine it's also possible That the threat to U.S financial Stability could come from a sudden Change in how the markets operate as it So happens the FED will be releasing its Fed now payment system in July This will make it possible for anyone in The United States to move money between Banks 24 7. again it's hard to see how This would translate to financial Instability but there has been lots of Speculation about fed now being the Catalyst for a market crash of some kind There is only one way to find out and That's to go down the FED now rabbit Hole and see what we find next week stay Tuned So that's all for today's video if you Found it informative be sure to smash That like button to let me know and Remember to subscribe to the channel and Ping that notification Bell so you don't Miss the next video trust me when I say That you won't want to miss our coverage Of fed now If you're focused on resisting the FED Through crypto then the coin Bureau Deals page is where you can find all the Defenses you need The biggest discounts on the best Hardware wallet and up to forty thousand

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