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    FED's Hawkish Monetary Policy under Dovish Disguise| Influencer Forex Analysis•Jasper Lo

    Abstract:Although the Fed remained the monetary policy unchanged as expected and reiterated in its post-meeting statement that it would pin the rate for the long term, which seems to be dovish, it takes hawkish actions instead. First of all, the Fed sharply raised its economic forecasts with the median of projections for GDP growth up to -3.7% for the end 2020 (-6% for June projection), the median PCE (personal consumption expenditure) inflation rate ending 2020 at +1% and the median core PCE inflation ending 2020 at +1.5%, which are both higher than PCEs of June projection.
    Jasper

      Although the Fed remained the monetary policy unchanged as expected and reiterated in its post-meeting statement that it would pin the rate for the long term, which seems to be dovish, it takes hawkish actions instead. First of all, the Fed sharply raised its economic forecasts with the median of projections for GDP growth up to -3.7% for the end 2020 (-6% for June projection), the median PCE (personal consumption expenditure) inflation rate ending 2020 at +1% and the median core PCE inflation ending 2020 at +1.5%, which are both higher than PCEs of June projection.

      The bitmap shows that the interest rate will remain at current levels until 2023, that is, the rate is likely to increase in 2024. The DXY staged a rally despite the Fed's reiteration of long-term low-interest rate both because of the sharp increases in economy and inflation projected by the Fed and the chance for the interest rate to rise in 2024. However, most analyses lose sight of the implication that the Fed will scale back quantitative easing (QE) prior to the rate increase. Taking the last rate-hiking cycle for reference, the U.S. embraced the cycle at the end of 2015, before when the Fed successively ended QE, lifted interest rates, and shrank the balance sheet.

    圖片.png

      In 2013, as the U.S. gained strength in the broader economy, the rumors that the Fed was going to cut back QE seized the financial market in Q1. The DXY thus was gearing up for a soar. At the end of 2013, the former Fed Chair Bernanke eventually announced to begin Fed's tapering of QE, resulting in the dollar price jumping from $80 to $100. After the statement, the financial market predicted that a rate-raising cycle was just around the corner, which at last triggered at the end of 2015. Considering that the period from the tapering of QE to the occurrence of the cycle is just two years, the Fed may start the tapering early in 2022 if it sets to inspire the rate in 2024.

    圖片.png

      Notably, the financial market will hype the tapering in advance before it happens, which lasted for nine to ten months in 2013 according to the process mentioned above. In other words, next year is expected to see rumors of the U.S. tapering of QE in Q1 & Q2. With that said, investors should never be under the misapprehension that the greenback won't rise until the rate gets higher in 2024. The rate just increased at the end of 2015 even though the dollar had been poised for aggressive growth since early 2013.

      [About The Author]

      Since 1987, Jasper Lo has been engaged in the financial industry

      (forex, futures and gold) for more than 32 years and holds forex R.O.,

      securities and futures broker licenses. Mr Lo is an expert in trading

      forex, precious metals and commodity futures and an basic and technical

      analyst.

      Over the years, Mr Lo won many individual and team sales champion

      awards, as well as outstanding employee awards. He was invited, as a

      guest mentor, to the University of Hong Kong, Guangdong Ocean University

      and Guangzhou Jinan University. And he was also appointed as the chief

      training consultant by Hantang Securities and Dongguan Securities in

      China.

      Mr Los experience as guest of honor invited by media including Chinese and English newspapers and columnist:

      -Guest of honor invited by TVB New Channels such as Finance Channel, Forex Focus, Global Watch

      -Guest of honor invited by Now Finance Channel - Forex Reports

      -Guest of honor invited by i-CABLE Finance Info Channel - Forex Opportunities

      -Guest of honor invited by ViuTV - Investor Smarter Group

      -Columnist of Finance and Forex Market of Ming Pao

      -Presenter of Finance and Forex Forecast of Ming Pao

      -Presenter of Investment 36 Stratagem and Technical Analysis in 1 Min of Ming Bao Finance

      -Appointed lecturer of Ming Pao Investment Seminar and Paid Course

      -Author of the best seller Investment 36 Stratagem

      -Columnist of Forex Expert, Forex Analyst, Marathon Weekly of ET Net

      -Guest of honor of Open Good Morning of ET Net

      -Guest of honor of Metro Finance Channel - Market Opening, Instant

      Market Fighting, Guangdong-Hong Kong Finance, Finances Power, Market

      Analysis

      -Guest of honor of New Era of Investment of RTHK

      -Columnist of Capital Commodities of Capital Weekly

      -Guest Presenter of Wang Guanyi Online Finance Channel - Fund and Commercial Bond

      -Columnist of Wealthub Finance and Investment Smart Platform of Enrich Culture

      -Guest presenter of Weekly Investment in the World of Enrich Culture

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