Here’s a quick comment on the FOMC. First of all… The most questions were asked about the banking system… Powell says the policies that have been implemented so far have been extremely effective and valid. And he repeatedly commented that the banking system crisis has been solved. Yes, I think the character of the comment to show confidence as an official was very, very strong. That way you can control your unexpected anxiety.. But I’m worried about journalists repeatedly.. Isn’t this an unprecedented situation.. If you know so well, why did this happen.. When you get questions about details, such as asking questions such as the back, don’t ask me, saying that the vice-chairman will make an announcement next week.. I’m just a commentator when the policy comes up.. He showed his avoidance by saying that.

A lot of people are looking at the FOMC, which can pose an unexpected risk to the market. Because Powell’s words are so heavy.. I think I read a lot of thoughts about passing it over today. Attention will be paid to what kind of presentation will be made in the next week. I wonder how regulations on small and medium-sized banks will be strengthened. But if the regulations get stronger, small and medium-sized banks can’t do what they want.. That’s how much these banks’ loans won’t increase. The central bank could be the source of liquidity for the market, but.. The main one is the commercial bank. In the past, there have been few cases where central banks directly supply liquidity to the market. Central banks provide liquidity to commercial banks… The key is the structure in which commercial banks supply this liquidity to the real economy in the form of loans.

But wouldn’t the liquidity supplied to the market also tighten if commercial banks’ loans contract? As commercial banks’ bank run concerns grow stronger, it makes them want to hold cash… Likewise, even if loans contract, it will tighten liquidity. That’s why Powell says that during the press conference. a contraction of credit.. In other words, a reduction in banks’ lending could replace the Fed’s rate hike… Yes .. If commercial bank loans decrease, the Fed does not have to raise interest rates… The supply of liquidity in the market is decreasing.. It’s self-tightening.

At the end of the press conference, Powell responded to a reporter’s question about the financial environment… It’s tighter than in the past… When I answered like this at the last meeting… A lot of experts are asking what you’re talking about… Indexes such as the FCI index show no signs of tightening in the financial environment, such as returning to levels before the tightening began early last year.. There was a story about what the hell you were looking at. Perhaps conscious of this, Powell… We need to look at the general financial environment index, but.. He commented that the shrinking loans of commercial banks also means a tight financial environment. Yes… The Fed itself is also concerned that the current situation could reduce the liquidity supplied to the market. The banking system is telling us that there’s nothing wrong with it… It’s not a collapse problem, but we’re paying attention to the impact of shrinking loans. A contraction in loans could lead to a contraction in the real economy. I think that’s why we talked about the resolution for a while… 50 bp curiously, then retreat… I think this is also the reason why it foreshadowed a significant further rise in the dot plot and ended up with little change.

Next, we raised the interest rate by 25 basis points. On the dot plot, we’re seeing one additional increase. And the comment that made the market sink… We do not consider lowering interest rates within the year.. If there is a cut, it is the worst.. There was a saying like that. How Fast, How High, How long 중… Now the first two are almost done. The pace of rate hikes has already been taken off the table.. The height of interest rate hikes is also nearing its end. Now, the focus will be on how high the current interest rate will be maintained. a significant recession in the real economy, an adjustment in the financial market… Or, if there is no reduction in bank loans, it is not easy to cut interest rates. So if this happens, isn’t it possible.. Then isn’t it a pivot.. You might think that… Is it the worst enough to cut interest rates… It can arouse the fear that. To say that it can only be cut in the worst… Lowering interest rates does not mean supporting asset prices… It would be right to see the struggling market as a cushion that somehow supports it.

Raising interest rates raises stock prices… There was a saying like that. Why? Because the economy is good, interest rates are raised because of that confidence… If you cut interest rates, the stock price goes up.. There’s also a saying like that. A rate cut is a sign of pivoting.. By the way… Looking at the past, there are many experiences that the stock market has struggled quite a bit in the face of interest rate cuts. This is because they have belatedly started to cut interest rates to support the collapsing real economy. A rate cut in anticipation of the worst… It’s actually hard to predict the worst here. We’re going to start cutting interest rates as we see the worst of it actually going into it. Perhaps, contrary to the market’s expectations, we should also consider the possibility that a rate cut will not create a surge in stock prices.

There are a few more.. Let’s talk about it together in our weekend essay. I’m going to shorten today’s essay here. Thank you.