This is What Comes Next From The Fed! Impact on Markets?!

Last week the Federal Reserve held its First press conference since July and Chairman Jerome Powell pulled no punches During his speech what Jerome said sent Shock waves through the market and it Has left many wondering just how far the FED will go to break the back of Inflation Today I’m going to summarize what Jerome Said explain what it means in simple Terms and examine whether the FED could Soon be forced to Pivot Oh For those who don’t know the FED holds a Press conference almost every month in Which its chairman in this case Jerome Powell announces how much the central Bank will be raising interest rates by And answers a few questions from Reporters about future interest rate Adjustments Although last week’s press conference Was the fed’s first since July many of You will know that Jerome spoke at the Jackson Hole Symposium at the end of August if you watched our video about Jerome’s Jackson Hole speech you’ll know It was about as hawkish as it could have Been This is why many investors believed that The FED had already reached Peak Hawkishness going into the recent press Conference in other words they believed Jerome couldn’t possibly be any more

Explicit about the fed’s intentions to Raise interest rates aggressively to Kill inflation Well it seems that Jerome managed to Find a way to turn the dial all the way Up to 11 because his rhetoric last week Was somehow yet more hawkish than his Rhetoric at Jackson Hole note that I’ll Leave a link to the full fed press Conference in the description if you’re Interested Now the fed’s recent press conference Began the same way they all do with Jerome waddling his way onto the stage With a big white binder that’s probably Filled with blank pages Jokes Aside Jerome wasted no time Getting straight to the point once that Binder was cracked open the FED is Committed to Bringing inflation back Down to the central bank’s two percent Target and it will use all the tools at Its disposal to do so Jerome then reiterated something he had Said at Jackson Hole and that’s that the Economy does not work without price Stability on that note it seems that a Lot of what Jerome said during his press Conference speech was literally copy and Pasted from his Jackson Hole speech in Any case Jerome went on to explain that The FED decided to raise interest rates By another 75 basis points or 0.75 Percent

This had been priced in by the markets According to the cme’s FED watch tool Though some investors were expecting the FED to raise rates by a full percentage Point Jerome also reminded the audience that The FED has begun selling assets from Its balance sheet to the tune of 95 Billion dollars a month This started at the beginning of September and the composition of the Sell-off is roughly 60 government debt And 40 Mortgage Debt more on that later Jerome went on to review some economic Data including weaknesses in the housing Market and a decline in GDP Jerome made Sure to mention that the unemployment Data is still looking strong despite the Apparent downturn which is debatable Given how unemployment is calculated Jerome then said that the fed’s own Projections suggest that unemployment Will rise to 4.6 percent in the next Year note that this is above the fed’s Unemployment Target of 4 but Jerome was Not bothered by this as he had Acknowledged at Jackson Hole that Bringing inflation down will require Economic pain After discussing the disappointing Inflation figures for the CPI core CPI Pce and core pce Jerome acknowledged That most of the inflationary pressures Are coming from supply side issues

Jerome also acknowledged that long-term Inflation expectations are still quote Well anchored even so Jerome stressed That now is not the time for complacency Inflation must be crushed to that End The Fed will continue raising rates and Continue selling assets off its balance Sheet which should also cause interest Rates to rise Interestingly Jerome specified that the FED would look for quote compelling Evidence that inflation is coming back To that two percent Target before even Thinking about slowing the pace of Interest rate increases Unfortunately Jerome did not specify What kind of compelling evidence he’s Talking about Jaypo concluded by repeating that the FED must bring demand down so that it is Back in line with Supply and that this Will inevitably result in a quote Sustained period of below Trend growth Again the FED does not care because Inflation is what it’s focused on Then came the question period and it Looks like Jerome’s responses here are What shook the markets the most the First question came from a reporter at The New York Times and they asked Jerome How the FED will know it’s time to stop Raising interest rates Jerome responded By saying that the FED quote wants to See growth continue to run the low Trend

Put simply the FED will keep raising Interest rates until it causes a Recession deep enough to bring inflation Down This means what we’re seeing now is Likely just the beginning the second Question came from a reporter at CNBC And they asked Jerome how the FED can Continue to raise interest rates when it Relies on backward-looking indicators Such as the CPI And pce to clarify the CPI pce and other such statistics are Typically released long after the month They’re measuring Jerome acknowledged that the fed’s Monetary policy would lag if it relied Solely on these indicators which is why The FED also pays close attention to Financial markets Jerome pointed out That financial markets react immediately To the fed’s interest rate increases Because they are forward-looking more Importantly Jerome essentially said that The FED wants markets to crash This is because of a hotly debated Economic theory called The Wealth effect In short crashing the markets means that People are likely to feel poorer this Means they’re likely to spend less which Brings down inflation The CNBC reporter followed up with a Second question and that’s whether the FED will ever pause its interest rate Increases to assess just how much damage

They’re doing to the economy for context It takes about a year for the effects of Higher interest rates to be felt in the Actual economy Jerome responded by Saying that the FED will raise interest Rates as high as they must so that Inflation comes back down to two percent He then specified that the FED is at the Lower bound of How High interest rates Will need to go confirming that many More interest rate increases are a Coming now the third question came from A reporter at the Washington Post and They asked Jerome whether the fed’s Projections of rising unemployment means There won’t be a soft Landing for Reference a soft Landing means that the FED will get inflation under control Without causing a recession Jerome’s response was basically yes but He said that the severity of the Recession has yet to be determined given That inflation is coming from Supply-side shocks that the FED cannot Control translation we are trying to Bring down demand and if Supply doesn’t Improve Then it’ll be bad The fourth question came from a reporter At the Wall Street Journal and they Asked Jerome how high the FED will raise Interest rates This question was actually posed in a Very clever way as the reporter asked

Jerome whether interest rates will Remain below the inflation rate I.E Below 8 or so Jerome said the FED will continue to Raise interest rates until it has a Sufficiently restrictive effect on the Economy I.E brings down inflation Jerome added that the FED wants real Interest rates to be positive across the Entire yield curve this is significant Because real interest rates mean Interest rates minus inflation in this Case interest rates would have to be Above eight percent for them to provide A real yield to investors note that this Doesn’t necessarily mean the FED will Raise interest rates at high inflation Will eventually come down The fifth question then came from a Reporter at Reuters and they asked Jerome whether the FED will raise rates By another 75 basis points next month Jerome explained that the FED will raise Rates by at least another 125 basis Points or 1.25 between now and the end Of the year in whichever increments are Deemed appropriate This prompted the Reuters journalist to Ask a second question and that’s why the FED is front loading its interest rate Increases instead of raising interest Rates gradually as it has in the past Jerome’s response was odd because he Said that supply side issues are

Improving but inflation hasn’t come down This makes me wonder whether Jerome is Aware of the second order effects a Global price cap on Russian oil could Have come early December note the Treasury Department said it will Sanction any country that ignores this Price cap at the same time Russia has Said that it will not export to Countries that comply with the price cap The end result will be higher energy Prices for the countries caught in the Middle which is probably why treasury Secretary Janet Yellen recently said That energy prices will rise again in The winter now the sixth question came From a reporter at the financial times And they asked Jerome about the Discrepancy between investor Expectations that inflation won’t come Down until 2025 and investor Expectations that the FED will begin Cutting interest rates much earlier Jerome seems to have Shrugged off this Question by saying the two timelines for These expectations are close enough that They aren’t a concern This inspired the reporter to ask a Second question and that’s why the FED Didn’t raise interest rates by a full Percentage point if it’s so concerned About inflation Jerome said that their decision was made Based on the inflation data that had

Come in over the summer I suspect this Isn’t entirely true as there are rumors That the other members of the fed’s Board of Governors are starting to get Concerned about the effects these Aggressive rate hikes are having on the Economy as such it’s possible that they Pushed Jerome to keep on with the 75 Bibs The seventh question came from a Reporter at Politico and they asked Jerome about the FED selling assets from Its balance sheets specifically Mortgage-backed Securities this is Because selling off these assets would Likely do damage to the housing market Which is finally starting to take a Beating more about that using the link In the description Now Jerome essentially said that the FED Doesn’t care about the effects its Balance sheet runoff could have on the Housing market right now this is Probably because of the wealth effect I Mentioned a few moments ago crashing the Housing market could help bring Inflation down which is good for the Fed The eighth question came from a reporter At axios and they asked Jerome about the Risks of central banks around the world Collectively raising interest rates so Rapidly note that the FED wasn’t the Only Central Bank to raise interest Rates last week there were many others

Including the good old Bank of England Jerome responded by saying that he had Recently met with all the other Central Bankers in Basel Switzerland presumably At the headquarters of the bank for International settlements Jerome added That they’re all aware of the effects Their interest rate increases are having On the economy more about the bank for International settlements in the Description I digress The ninth question came from a reporter At Bloomberg actually two reporters now I was honestly shocked by their line of Questioning because they asked Jerome How it’s possible that the economy is so Strong and whether it’s acceptable for So many people to lose their jobs Because of the fed’s rate hikes Jerome Started by repeating that the FED is Committed to Bringing inflation down to Its two percent Target he then Reiterated that we’re likely to see a Prolonged period of below Trend growth But this time specified that it could Continue until the end of next year Then Jerome went full Hawk and insisted That the FED must do damage to Employment to bring inflation down he Admitted that it’s going to be an Extremely painful process and even Admitted that the FED won’t know for Sure when it’s the right time to stop Raising interest rates yikes

The tenth question came from a reporter At the Associated Press and they asked Jerome to explain why it is that Allowing inflation to run hot would do Damage to employment Jerome said it’s Ultimately because inflation eats away At wages and causes things to become Ever more unaffordable The 11th question came from a reporter At Fox Business and they asked Jerome How long Americans will have to feel the Pain of higher interest rates for Jerome’s response was straightforward it All depends on how long it takes for Inflation to come back down to the fed’s Two percent Target The 12th question came from a reporter At CNN business and they asked Jerome How it’s possible that housing costs Continue to go up despite the increase In interest rates including the cost of Rent They also asked what Jerome meant by Resetting the housing market in his Jackson Hole speech Jerome outright said That the FED wants to bring the cost of Housing back in line with the Fundamentals so that the average person Can afford to buy a home again what’s Scary is Jerome admitted that rents may Not come down anytime soon even with the Housing market crash Now the final question came from a Reporter at Market News International

And they asked Jerome whether the FED Will hit an interest rate of roughly 4.6 Percent by the end of the year given his Earlier comments Jerome confirmed that Yes this is roughly what the interest Rate will be come January and with that Jerome waddled off stage with his white Binder and around the world assets of All kinds started to crash including Every currency that’s not the US dollar So this brings me to the big question And that’s when the FED will finally Pivot in case you’re confused a pivot Means that the FED will stop raising Interest rates and start lowering them Again obviously this will cause assets Of all kinds to pump since investors Will resume borrowing Fiat to buy said Assets The consensus is that the FED will pivot Once something in the financial system Starts to break historically the FED Pivoted when the stock market crashed However it’s clear that this time around The FED cares more about bringing down Inflation than stock prices and even the Actual economy as such the answer of When the FED will finally pivot depends On the answer to another question what Does the FED care about more than Inflation as far as I can tell the only Thing that the FED cares about more than Inflation is the Global Financial system Which is heavily influenced by the

United States As it so happens cracks in the Global Financial system are starting to show The first set of Crags are the Collapsing values of other currencies Against the US dollar this set of cracks Is being caused by two things Discrepancies in Central Bank monetary Policies and energy shortages Some central banks such as the bank of Japan have been slow in raising interest Rates this is causing Capital to exit These countries and currencies into the United States and the US dollar This is simply because investors can Earn higher yields on U.S government Debt at the same time some countries Such as Germany are facing acute energy Shortages this is forcing them to sell Their National currencies for US dollars So they can buy energy something that’s Necessary given the US dollar status as A reserve currency logically this Selling weakens these currencies the Resulting weakness in these currencies Causes the interest rates on the Government debt of these countries to Spike that’s simply because investors Start to see these countries as higher Risk and demand a higher yield to Compensate for this and the currency’s Loss in value relative to the US dollar This relates to the second set of cracks In the Global Financial system which

Have just started to form and that’s the Markets for U.S government debt that’s Because central banks are slowly but Surely starting to sell off their U.S Government debt for dollars to buy their Own National currencies the bank of Japan actually did this late last week And it’s considered by many to be a Watershed moment for the Global Financial system besides the fact that Japan is the largest holder of U.S Government debt outside the United States this action could Inspire other Central banks to do the same if central Banks around the world start selling off U.S government debt for dollars to buy Their own currencies to increase their Value then interest rates in the United States will explode this will leave the FED with no other option but to buy all This U.S government debt to bring down Interest rates if that happens however Then it will shake the confidence in the United States is standing in the Global Financial system no not only that but It’s likely to lead to even more Inflation in the United States and the Rest of the World by extension this Would again shake the confidence in the U.S and the US dollar now it looks like We are much closer to this outcome than You think but it’s important to point Out that if it does in fact happen then It would likely take months if not years

To play out In the meantime we will see no shortage Of volatility across financial markets Most likely to the downside once the Dust has settled however cryptocurrency Will be prepared for Mass adoption and BTC will be perfectly positioned to Become the world’s next Reserve currency More about that using the link in the Description And that is about all for today’s video About the feds press conference if you Found it informative smash that like Button to let me know If you want to make sure you don’t miss The next one subscribe to the channel And ping that notification Bell before You go While you wait you can check out coin Bureau clips for live streams and Emergency Market updates and tune in to The coin Bureau podcast for in-depth Crypto discussions You can also follow me on Twitter Instagram and Tick Tock for memes and Behind the scenes and all that kind of Jazz and join my telegram channel for The kind of daily crypto updates you Need If you want to know what’s coming next For the crypto Market subscribe to My Weekly Newsletter to get my exclusive Forward guidance as well as a detailed Breakdown of my personal crypto

Portfolio and if you want to support What we do head on over to the coinbure Merch store and get yourself some crypto Themed hoodies and sweaters to stay warm While looking crypto this winter you can Find your way to all these resources and More using the links in the description As always thank you so much for watching And I’ll see you next time Adiosenia goodbye foreign [Music]


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