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Huobi HTX Chief Analyst: The Fed's hawkish rate hikes reshape policy credibility

Regarding the Federal Reserve's decision to raise interest rates by 25 basis points as expected in the September meeting, Huobi HTX Chief Analyst Andy pointed out that what truly deserves attention is the comprehensive hawkish shift in the Federal Reserve's stance. All 12 officials rarely supported the decision unanimously, and the dot plot clearly indicates another rate hike within the year, with tightening becoming a consensus.The core message conveyed by the meeting is that the Federal Reserve is determined to rebuild its credibility against inflation at all costs. The economic forecast summary raised growth expectations and lowered the unemployment rate, reflecting confidence in a soft landing; however, the path for core inflation to decline has been significantly delayed, indicating that the higher-ups have accepted the reality of "higher for longer." Chairman Waller's statement is particularly crucial, placing anti-inflation efforts as an absolute priority. Even though the current economic fundamentals are robust and oil price fluctuations are supply-side factors, the Fed still chooses to respond with a tightening stance. This "better to be too tight than too loose" position has temporarily pushed up U.S. Treasury yields and the dollar, while suppressing gold.For the cryptocurrency market, uncertainty has actually decreased. A clearer policy path helps compress risk premiums, which is not a bad thing for risk assets in the medium to long term. The key going forward lies in data validation: if employment and growth remain strong, rate hikes may continue but at a slower pace; if the economy shows cracks, there is still room for a policy shift. Overall, the Federal Reserve is trading short-term pain for long-term policy credibility.

The Federal Reserve raised interest rates by 25 basis points, and Waller stated that the issue lies with inflation, while the market bets on three more rate hikes next year

The Federal Reserve's FOMC unanimously decided to raise interest rates by 25 basis points, adjusting the target range for the federal funds rate to 3.75% - 4%, marking the first rate hike since July 2023. The latest dot plot shows that 16 officials expect at least one more rate hike by 2026, with the median rate expectations for 2027 and 2026 both at 4.1%.Federal Reserve Chairman Waller stated that recent data shows the U.S. economy is performing strongly, and the labor market remains resilient, but inflation is too high and has persisted for too long. The FOMC is currently not confident that inflation is moving toward the 2% target. He mentioned that the main issue for the current economy is not growth, but inflation. Waller also noted that the rise in U.S. Treasury yields is primarily driven by a strong U.S. economy, increased capital competition, and geopolitical factors.From the announcement of the decision to Waller's press conference, spot gold briefly fell by about $100, the U.S. dollar index rose by about 40 points and broke through the 100 mark, the 2-year U.S. Treasury yield rose by about 10 basis points, and the 10-year yield rose by about 5 basis points, with U.S. stocks turning lower across the board. Interest rate futures are currently pricing in an additional rate hike of about 33 basis points this year and expect a cumulative increase of about 75 basis points by June next year.
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