More Rate Hikes?? FED’s Press Conference REVEALS This!!

Last week the Federal Reserve raised Interest rates for the 11th time Bringing short-term interest rates in The United States to between 5.25 and 5.5 percent The consensus among investors is that The FED is almost finished hiking However we are starting to see early Signs of an inflation shock that could Force the FED to raise rates higher than Investors expect this could cause Serious Market volatility and not just In stocks and crypto So today we're going to bring you up to Speed on what the FED has been up to Summarize the press conference explain Why an inflation shock could be imminent And examine what it could mean for the Market As almost all of you will know the FED Has been raising interest rates since Last spring to fight inflation This initially caused markets to dump But for the last half year or so it's Been nothing but pump this is simply Because the markets are forward-looking Prices reflect what investors believe Will happen since the start of the Year Investors have believed that the FED Will be forced to pause stop raising Interest rates or pivot lower interest Rates they believed the former would Happen if inflation started to come back And that the latter would happen if the

Fed's rate hikes caused too much Financial stress So far it looks like the former scenario Is in play the FED paused or rather Skipped raising interest rates at its Last meeting back in June This pause wasn't really due to Inflation but due to increasing caution On the part of the Fed For context it can take a long time for A change in interest rates to affect the Economy that's because it takes time for Individual and institutional loans to Roll over that is to be refinanced at a Higher interest rate Higher interest rates mean more money Goes towards paying back debts which Slows the economy academic research Frequently cited by the FED suggests That this so-called lag effect can take As little as six months and as long as Two years Given that the FED started raising Interest rates last spring we're Entering a period where the stress of High interest rates should start to Affect the economy at the same time it's Believed that U.S banks have reduced Their lending activities because of the Banking crisis back in March reducing Loan issuance could slow the economy Even faster than the lag effect These factors combined with gradually Lower inflation are why the FED has

Basically paused there are just three Caveats The first is that inflation is still Much higher than the fed's two percent Target particularly core inflation which Is still around five percent For reference the FED only watches Headline inflation because it affects Inflation expectations Core inflation is what the FED is truly Concerned about The second caveat is that the economy Seems to be accelerating not slowing the Day after the fed's most recent meeting U.S GDP figures for Q2 came in much Higher than expected this strong Economic growth risks keeping core Inflation higher for longer and the FED Would have to respond in kind Now the third caveat has to do with Headline inflation For those unfamiliar headline CPI is Very volatile because it includes the Costs of food and energy as it so Happens the costs of food and energy Appear to be increasing again This foreshadows higher than expected CPI prints in the coming months and yet The stock market continues to rip higher With crypto lagging behind not only that But the stock market rally is reportedly Broadening a sign that this is more than A bear Market rally This is something that nobody predicted

Except for one man and will be telling You all about him later this week Anyways it's against this backdrop that Fed chairman Jerome Powell waddled onto The stage to tell the world about the Fed's most recent decision and answer Questions from the assembled media he Started by saying that the FED is Committed to Bringing inflation back to Two percent and raised interest rates by 0.25 to that end Jerome also mentioned that the FED is Continuing to reduce the size of its Balance sheet that is its selling U.S Government debt this has the Practical Effect of raising longer-term interest Rates which the FED actually can't Control directly the FED only has direct Control over the shorter term interest Rates Jerome cautioned that the effects of These rate hikes has yet to be felt as I Mentioned earlier and that the FED will Be quote data dependent in its future Rate hike decisions translation if the Economy or inflation accelerates we will Raise rates and if the economy or Inflation slows we will pause or pivot Jerome went on to cite unemployment Statistics which the FED uses as a proxy For the economy he highlighted the fact That unemployment Still Remains at a Multi-year low of around 3.6 percent in Theory this gives the FED more room to

Raise rates but in practice they don't Want to rush that at this point More importantly Jerome pointed out that Wage growth is slowing down Now this is significant because there Had been concerns of a so-called wage Price spiral wherein High inflation Results in higher wage increases which Causes inflation to stay high which Causes even higher wage increases and so On the fact that wage growth is slowing Down is therefore a good sign for those Who subscribe to this economic theory on The flip side though it could be Evidence that interest rates are finally Starting to affect the economy employers May be unwilling or even unable to raise Wages much higher Jerome then listed a few inflation Statistics including the headline CPI The core CPI the headline pce and the Core pce on that note you should know That the pce is the fed's favorite Inflation measure The latest pce Figures were published Last Friday and they also came in below Expectations that is lower inflation That said all of these figures remain Well above the fed's two percent Target And Jerome underscored this fact He reiterated that the FED is committed To Bringing inflation back down to two Percent he repeated that the FED raised Rates by another 25 basis points to that

End he must surely be getting sick of Saying those lines by now He also restated the fed's balance sheet Shrinkage speaking of which the fed's Balance sheet is finally back below what It was prior to the banking crisis it's Surprising that the fed's balance sheet Runoff hasn't caused any Market Disruption considering that the treasury Department has also started issuing debt To refill its bank account at the FED if You watched our video about that you'll Know that the treasury's move to refill Its bank account could suck money out of The markets so far it hasn't but the Treasury is reportedly planning on Issuing longer-term government debt Later this month it'll be interesting to See how that affects markets if at all Anywho once Jerome was finished speaking The question period began the first Question came from a reporter at CNBC They asked Jerome If the Fed is going to Skip every other meeting from now on or If every meeting is quote live meaning That the FED could change its mind at The last minute Jerome said that the FED will go meeting By meeting and that their decisions will Depend on the data he reminded everyone That the FED will be off until late September and there will be two jobs Reports and two inflation reports Between now and then

We'll leave a link to the calendars in The description Now the second question came from a Reporter at the New York Times They Asked Jerome if economic re-acceleration Creates a risk that there will be more Inflation Jerome started by saying that it's great To see the economy as doing well but Confirmed that yes too much growth means More inflation and of course that means Higher interest rates the third question Came from a reporter at axios they asked Jerome why the FED isn't pausing Considering that the data is going in The direction it wants to see Jerome Warned that a couple of data points Isn't sufficient for the FED to be Confident that inflation is truly coming Down Now the fourth question came from Nick Timuros at the Wall Street Journal the So-called fed Whisperer He asked Jerome If the Fed will be Watching unemployment figures Jerome Said they would be watching everything And emphasize that it's possible that Lower than expected CPI prints were a One-off Nick followed up by asking if a lower Than expected CPI print next time would Mean another pause Jerome stressed that There will be two more CPI prints and Two more jobs reports between now and

September and that this is what the FED Will be paying the most attention to so Take note The fifth question came from a reporter At the Associated Press they asked Jerome how much the average consumer is Being heard by three percent headline Inflation implying that the FED should Pause or pivot Jerome said that core inflation is still Too high and said that it's a leading Indicator for headline inflation he then Made it clear to everyone that core Inflation still needs to come down this Is odd because it does seem to be coming Down albeit slowly core cpi's slow Movement also makes Jerome's claim of Core CPI being a leading indicator for Headline CPI a bit questionable as you Can see the two seem to move in tandem In any case the sixth question came from A reporter at Bloomberg they asked Jerome if base effects combined with Rising food costs will force the FED to Do more now this was arguably the most Important question of the entire press Conference you'll remember that food and Energy costs appear to be rising what's Annoying is that Jerome essentially Dodged the question the closest thing he Gave to an answer was quote our policy Hasn't been restrictive enough for long Enough Now in Jerome's defense this is a

Difficult question to answer because the Resurgence in energy and food costs Could be short-lived anyhow the seventh Question came from a reporter at the Financial times They asked Jerome how the next meeting Being live is consistent with his Previous comments about being more Cautious What's fascinating is that Jerome said The FED does not want to provide too Much forward guidance right now in other Words the FED doesn't want to commit to Doing or not doing anything This is fascinating because it will have The effect of creating more uncertainty In the markets the thing is that this Isn't the first time Jerome said the FED Would stop giving forward guidance let's Just say that he didn't keep his word Now the eighth question came from a Reporter at Reuters they asked Jerome Whether he thinks the effects of the Fed's tightening have been felt already Or if they're still coming Jerome didn't Have a clear answer but he kind of gave One earlier he or at least the FED still Thinks that the effects are yet to be Felt the ninth question came from a Reporter at the Washington Post they Asked Jerome if inflation is falling Because of the fed's rate hikes or Something else Jerome explained that Inflation seems to be falling mostly on

Its own due to a combination of demand Coming down and Supply coming back Online even so he believes that monetary Policy has also played a role This was just for headline inflation Though for core inflation Jerome didn't Have much of an answer so the reporter Followed up by asking what does affect Core inflation Jerome claimed it's mostly the FED but He didn't really seem to believe it the Tenth question came from a reporter at Fox Business they started by Complimenting Jerome on his tie which Was a bit strange considering Jerome was Wearing a pretty unspectacular piece of Neckwear Anyhow they then asked Jerome about Whether unionization would lead to wage Increases and higher inflation Jerome Refused to answer good call the 11th Question came from a reporter at Politico they asked Jerome about whether The FED will start to cut interest rates When inflation Falls below 3 percent Jerome proclaimed that the FED will not Cut rates until next year at the Earliest but It ultimately depends on All the upcoming inflation and jobs data The 12th question came from a reporter At Bloomberg they asked Jerome If the Fed is forecasting a recession jerem Revealed that the FED staff are no Longer forecasting a recession but noted

That fed staff are not the same as their Federal open markets committee or fomc He didn't say what they believe Now this is a small but significant Detail because many news outlets claim That the FED is no longer forecasting a Recession because of these comments but It's the fomc's opinion that matters the Most We won't know what they're forecasting Until the next summary of economic Projections in September The 13th question came from a reporter At CNBC they asked Jerome how many Months of data the FED needs to see Before adjusting interest rates Jerome Gave a completely unrelated yet Informative answer the FED could start Cutting rates as inflation approaches 2 Percent but this may not happen until 2025. Now the 14th question came from a Reporter at Yahoo They asked Jerome about the banking Crisis specifically whether more banks Will collapse Jerome insisted that the Banking system was sound and resilient Some of you may have seen the news that Another Regional Bank failed shortly Afterwards regardless the reporter Followed up by asking Jerome if this is Affecting the fed's interest rate Decisions Jerome revealed that the Fed Was expecting the banking crisis to

Cause a significant reduction in Bank Lending but apparently this hasn't Happened at least not yet this could Explain the 25 basis point hike The 15th question came from a reporter At Barons they asked Jerome If the Fed Is concerned about the aforementioned Wage price spiral Jerome said that the Risk of this is low given the Aforementioned slowing of wages but said That the FED wants to see softening in The labor market some would say that This means the FED still wants to see a Recession Speculation aside the reporter followed Up with a radically different question And that's what Jerome has to say to all The people who are struggling due to Higher interest rates Jerome had an Equally radical answer inflation is Hurting the lower class the middle and Upper class can put up with higher rates The 16th question came from a reporter At The Economist they asked Jerome if The meeting the FED just had was live And if there were doubts about the Decision Jerome scoffed at the idea that There were doubts but said we will all See when the minutes are released Suggesting there were in fact doubts FYI The minutes of the fed's meetings are Released three weeks after the meetings They summarize take place they typically Don't have anything particularly

Groundbreaking which is why we don't Often cover them but it sounds like the Next Edition could be a big deal for the Markets if it is then you can bet we Will be covering them The 17th question came from a reporter At market news they asked Jerome if the Ongoing bull market in stocks affects The fed's decisions Jerome effectively confirmed that the FED will have to raise rates even more If the markets continue to Rally but Also said that market conditions can Change yikes The 18th question came from a reporter At American Banker they asked Jerome If The Fed is monitoring the fed's bank Term funding program or btfp the Facility introduced in the aftermath of The banking crisis in March Jerome said yes but didn't provide any Additional details peculiar indeed The 19th question came from a reporter At bank rate they asked Jerome whether The housing market is coming back into Better balance something that Jerome Said the FED wanted to see and is Clearly not happening Jerome acknowledged that there's still Work to do on that front the final Question then came from a reporter at Market news they asked Jerome whether Russia's decision to pull out of the Ukrainian grain deal will lead to higher

Food inflation and affect the fed's rate Hikes a damn good question Jerome kept saying that the FED is Watching this very closely which is Revealing still Jerome said that it's Not affecting the fed's rate hikes at Least not for now So this brings me to the big question And that's why inflation could see a Resurgence in the coming months by now You'll probably know the answer Rising Food and energy prices which are key Components of the CPI Besides the Russian grain deal petrol Prices in the United States have started To rise oil prices in general have also Started to rise and that's probably due To a combination of restricted Supply From oil producing countries like Saudi Arabia and a Resurgence in economic Activity in the U.S and elsewhere Weather conditions have also resulted in Increased energy demand and lower crop Yields then there's the issue of Base Effects because the CPI started coming Down last summer the CPI figures we see Between now and the end of the year Could be abnormally high due to the Relative comparison CPI could stay exactly where it is but Because it had fallen a year previously It would show up as an increase Complicated I know The good news is that these base effects

Have probably been priced in the bad News is that this doesn't change the Fact that a sudden spike in the CPI Could lead to an increase in inflation Expectations for the average person who Has no idea what the base effect is this Would force the FED to react accordingly Throw in Rising food and energy prices And you have a recipe for a CPI that Could Spike back over four percent by Some estimates in addition to increasing The chance of additional rate hikes it Could cause longer term interest rates To spike as investors seek to be Compensated for higher levels of Inflation in the future This would cause U.S bond prices to Crash which could cause volatility Across the entire Financial System since U.S bonds are used as collateral for all Of the financial loans If the Fed Continues to roll off its balance sheet And the treasury keeps selling longer Term debt the effect will be magnified Then again if there's anything that the Last year has taught us it's that what We expect to happen almost never happens In the words of a professional Trader Whose Name Escapes me quote what is Obvious is obviously wrong if we can see This then you can bet that institutional Investors can too that means that this Outcome isn't seen as a serious risk or It's been priced in already in either

Case what we need to be on the lookout For is black swans that could arise Because of a potential Resurgence in Inflation these black swans may not even Be Financial in nature they could be Social or political heck maybe there Won't be any black swans at all maybe Inflation will Spike stocks and crypto Will crash a little bit and then Magically recover while the FED Continues to raise rates higher than Anyone had ever imagined after all That's what's been happening since the Start of the year So folks never forget that the markets Can remain irrational longer than you Can remain solvent And that's all for today's video if you Found it informative let me know by Smashing that like button if you want to Make sure you continue being informed Subscribe to the channel and ping that Notification Bell if you want to inform Others share this video with them And whether you're a hardcore hodler or A trigger happy Trader the coin Bureau Deals page has something for you it's Got discounts on the best hardware Wallet and up to forty thousand dollars Of airdrops and bonuses on the most Liquid crypto exchanges you can get These deals and more down in the Description so thank you all for Watching and I'll see you next time this

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