US Federal Reserve moves towards increase interest rates,
US Federal Reserve moves towards increase interest rates, and what this could mean for EOS and other cryptocurrencies.
To those in my audience who are unaware, the United States Federal Reserve chairman (Jerome Powell) provided updated guidance on what the Federal Reserve intends to do about the current state of the U.S. market on Wednesday, June 16th, 2021. The Fed confirmed that it will almost certainly raise interest rates, most likely to try to stay ahead of potential future out-of-control market inflation. In this video, I will be going over a recent article that I read called "The Fed moves up its timeline for rate hikes as inflation rises" and giving you my opinion on what I believe that means for EOS and other cryptocurrencies. Link for this article will be in the description below, OK now let's get started.
To paraphrase the article begins with, on Wednesday, the Federal Reserve significantly increased its inflation forecasts and moved up the timetable for the next interest rate hike. The Fed did not provide a time frame for ending its massive bond-buying program, but Chairman Powell admitted that officials spoke about it during the meeting. At today's meeting, Powell compared today's meeting to last year's, in which he stated that the Fed wasn't "thinking about thinking about increasing rates." As one would anticipate, the FOMC unanimously decided to keep its benchmark short-term borrowing rate at zero.
In March, authorities said rate rises may not happen until at least 2024. The dot plot of individual member predictions indicated two increases in 2023. Although the Federal Open Market Committee (FOMC) increased its forecast for headline inflation to 3.4%, the meeting statement also said that "inflation pressures are transitory." Increased expectations stem from the 13-year high in consumer prices. "This was not what the market expected," James McCann, the firm's deputy chief economist, said. Rates will need to increase sooner and faster now, with the Fed projecting two increases in 2023. To upset the Fed, the recent rise in inflation has returned. Stocks fell and bond rates rose in response to the Fed announcement, as investors expected stricter Fed policy, including the expectation that bond purchases would end soon. “You must begin tapering quickly if you want to achieve two consecutive rate increases by 2023," said Kathy Jones, fixed-income chief at Charles Schwab.
The slower you go, the longer it takes to taper down. So, if the economy is hot, might rate increases happen sooner rather than later? Even with the estimate being increased, the committee sees inflation moving near its 2% target over the long term.
Just my opinion, but you know I find it interesting that, in March, the US Fed stated that interest rates would most likely not be raised until around 2024, and now, not even four months later, the new guidance is that interest rates will most likely be raised later this year. This is just my opinion, but it is starting to seem like the US Fed is not in complete control of what is currently happening in the US economy.
And in all fairness, how could they be? The all-new record spending and quantitative easing increases, AKA helicopter money, being injected into the United States economy, has never been done before, and so, logically speaking, there would naturally be some unintended consequences that would come along with it. My concern is whether they will be able to stay ahead of rising inflation by raising interest rates, or whether there will be more unpredictable market pressures that they did not anticipate, to which they will have to respond later on. Even if you are not a US citizen, this also involves you, because the US dollar remains the world's reserve currency, and what happens in crypto will naturally be influenced by what happens in the world's dominant economy.
To paraphrase the article continues with, "Inflation is expected to subside soon," Powell said at his post-meeting press conference. The dot-plot is not a strong forecaster of future rate movements. "Lift-off is decades away," he said. Some of the reopening-related factors "suggest that inflation may be higher and more sustained than we expected. “Some progress toward the Fed's dual employment and inflation objectives has been seen. The Fed saw GDP rising by 7% in 2021, a notable turnaround.
This increase is mostly due to recovering economic activity from low levels, as well as improving variables that were more impacted by the epidemic. Earlier this year, officials raised their GDP forecast to 7% from 6.5%, while the unemployment rate remained unchanged at 4.5%. The rhetoric of earlier comments was softened by the Covid-19 issue. "The epidemic has caused enormous human and economic suffering throughout the United States and throughout the world." A statement on Wednesday issued by the CDC said that indications of economic activity and employment had improved. The most damaged areas, while fragile, have improved throughout the epidemic. Since the depth of the pandemic catastrophe in 2020, the US economy has been going through fast growth. Since World War II, the U.S. has seen growth at the highest pace since then.
However, growth has been accompanied by rising prices, and the bank has received pressure from different quarters to limit at least $120 billion in monthly bond purchases. Chairman Jerome Powell said that Fed officials "had discussions" about the progress achieved in achieving inflation and employment objectives compared to asset purchases, and they will continue to do so in the months ahead. The markets have been waiting for the committee to address its open-market activities, where it offers short-term financing for financial institutions. As financial institutions search for any return above the negative rates they are experiencing in some markets, overnight repo operations have been experiencing unprecedented levels of demand. The committee raised the interest rate paid on surplus reserves by 5 basis points to 0.15%. Also, the FOMC extended dollar-swap lines with global central banks through the end of the year.
Just my opinion, but I think the true question here is whether we can trust that the US Fed is in control of what is happening within the US economy, considering that they have changed their tune on many occasions about what they expect to happen. This concerns me because it gives me little faith in the US Federal Reserve's ability to turn the US economy around. In all honesty, it seems to me that they are reacting to market pressures more than they are steering the ship to calmer waters, metaphorically speaking.
Which is why I so strongly advocate being prepared, and one of the best ways to be prepared for the coming economic storm is to have alternative assets in your portfolio. Especially programmable inflexible crypto assets like EOS. In particular, no one can truly know the future, most certainly not the United States Federal Reserve, because, as much power as they have to steer the course of the world economy, they are by no means infallible and, thus, they will most certainly make significant mistakes along the way. The real question, in my opinion, is whether they will adapt to changing circumstances quickly enough to correct course before it is too late, or whether they will continue down the same path until the ship metaphorically runs aground. My bet is on the ladder. Either way, be prepared, and financially protect yourself. As I have said often before, the decisions that you make today may save you from going through significant financial pain later on in the near future.
To all EOS holders, be prepared, and protect yourself.