Everyone in the financial markets was waiting for the US labor market data and the new statement from the Fed. The first ones turned out to be very good. It turns out, however, that they do not soften the stance of the Federal Reserve.
Employment in the US
US employment rose by 517,000 in January. That’s excellent news. At the same time, the unemployment rate fell from 3.5 percent to 3.5 percent. up to 3.4 percent This is the lowest since 1969.
What can make ordinary people happy, worries the Fed. He hoped that the situation on the labor market would deteriorate enough to cool down the markets and thus reduce inflation. The strength of the economy is evidenced by the fact that at the moment there are two jobs for every unemployed person.
Friday’s data confirmed the monetary authorities in their strategy – further interest rate hikes. should be continued.
In reaction to the new Fed announcement, the dollar strengthened again.
What about interest rates?
Let’s understand a certain relationship. To beat inflation, the Fed needs to cool down the market – reduce the circulation of money. This will be possible when people stop willingly taking out loans (hence the increase in interest rates) and start saving.
But as the Federal Reserve sees unemployment falling and consumer sentiment still buoyant, it fears inflation will start to pick up again soon. This is probably why the Federal Reserve wants to continue raising interest rates, perhaps even to higher levels than previously expected.
The Fed chairman himself, Jerome Powell, said during a speech at the Washington Economic Club that the process of disinflation in the US has begun.
The process of disinflation in the US has begun, but we still need to raise interest rates to make sure that inflation returns to 2%. purpose
he said. He added that if the data show that inflation is higher than expected by the authorities, we will face further interest rate hikes. He also stressed that “if we continue to receive, for example, good reports from the labor market (…) it may happen that we will do more and raise rates more than is priced in the market.”
He also asked for “patience”.
We believe we will have to keep interest rates at a restrictive level for some time before inflation comes down (…) Our message was that this process is likely to take some time. It won’t happen quickly. It’s probably going to be a bumpy road and we think we’re going to have to make further rate hikes like we said and we think we’re going to have to keep monetary policy tight for a while
Despite these words, the cryptocurrency market is going sideways after going parabolic the past month. . Sentiments are not bad either and still suggest “greed” of investors.
Bitcoin Fear and Greed Index is 58. Greed Current price: $22,700