FOMC March 2024: rates maintained at peak, Fed issues expectations of soft landing and sticky inflation.
As predicted, Fed decides to keep rates at peak: 5.25-5.5%, predicts 3 rate cuts in 2024:
Dot-plot of members shows projected rate at year-end (average of members' views) at ~4.6% , equivalent to 3 cuts (-75bps) this year.
Long-term rate projection (~2.5%) and 2024 projection unchanged - but projections for rates in the next 2 years (2025 - 2026) are both higher than in December.
Fed will slow down and extend the rate cutting process into the next 2 years.
Fed's macroeconomic data projections:
Fed adjusts forecast for unemployment rate at 4.0% , economic growth (GDP) at 2.4% this year:
=> all more optimistic figures (lower unemployment, higher growth) compared to December 2023 forecast => soft-landing expectations rise
However, Fed's forecast is that core PCE will be higher at year-end: 2.6% (vs. 2.4% forecast in December)
=> Fed fully recognizes the trade-off between sticky inflation and soft-landing!
Post-FOMC statement (FOMC statement): unchanged from December - except emphasizing that the labor market remains strong.
Viet Hustler’ opinions:
Economic projection data shows Fed's stance on interest rate policy remains quite hawkish, because if Fed assesses:
labor market remains tight (FOMC statement ),
soft-landing within reach (Fed increases growth forecast, lowers unemployment forecast)…
yet inflation remains persistent (sticky inflation - Fed increases Core PCE forecast)…
…then Fed will not rush to cut rates.
But anyway, at least Fed still has potential for 3 rate cuts this year, although Fed members' views (via dotplot) are not very consistent.
Current market trend to hedge interest rate policy change risks:
Soft-landing expectations cause high-yield credit spreads to fall below 3% for the first time since 2022.
However, uncertainty about macroeconomic direction causes investors to shift from short-term to intermediate-term bonds:
US intermediate-term government bond funds (including T-bond and government-related debt) attract 9.8 billion USD in the first 2 months of the year.
Assets of intermediate-term Treasury bond funds reach record 252 billion USD at end of February, (up +2% this year).
Oil prices continue to fall despite inventory drawdown
DOE oil inventory report update:
Crude: down -1.95 million barrels
Cushing: down -18,000 barrels
Gasoline: down -3.31 million barrels
Distillates: up +624,000 barrels
Crude production stable last week
Crypto-currencies: Ethereum ETF prepares for listing, Bitcoin Hashrate hits new record
SEC reviews for approval of Ethereum ETF listing: currently SEC requesting companies provide documents on transactions with Ethereum Foundation.
Outflows from Bitcoin ETF yesterday reached highest level this year.
Bitcoin attracts attention from Japan's $1.5 trillion pension fund.
New Bitcoin Hashrate record (computing speed to solve SHA-256 algorithm in Bitcoin mining): 600,000,000,000,000,000,000x per second
Celsius seeks to recover $2 billion withdrawn just before bankruptcy filing to avoid litigation risks - Bloomberg
BlackRock files with U.S. SEC to establish tokenized asset ETF with $100 million.
UK Financial Conduct Authority (FCA) plans to implement Crypto Market Abuse Regime framework in 2024.
Earnings update: Pinduoduo
Revenue: +123% Y/Y, surges to 12.5 billion USD
Online marketing services: Up to 6.86 billion USD, +57% Y/Y
Transaction services: Up to 5.66 billion USD, +357% Y/Y
Net income +146% Y/Y to 3.3 billion USD.
EPS: 2.39 USD
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