The key data that the Federal Reserve (Fed) considers when setting interest rates, the Consumer Price Index (CPI), will be announced on the evening of the 13th. The Fed’s current prediction is that the CPI will continue to slow down. In addition, several Fed officials will make speeches this week, and Coinbase will release its financial report.
Summary:
Powell suggests three rate cuts in 2024, and the Fed will not ease monetary tightening until at least March.
Background:
Fed freezes rates for the fourth time: Powell does not intend to cut rates in March, Bitcoin falls below $42,200, US stocks plunge.
Table of Contents:
US CPI data for January is about to be released.
Market attention on whether there will be a rate cut in May.
Several Fed officials will make speeches.
Coinbase and several other companies will release financial reports.
During the Federal Open Market Committee (FOMC) interest rate decision meeting on February 1st, the Federal Reserve (Fed) announced for the fourth time that it would stop raising interest rates and keep the interest rate range unchanged between 5.25% and 5.5%. Chairman Jerome Powell also stated after the meeting that it is unlikely that the inflation rate will reach the Fed’s target of 2% before the March meeting, which means that it is unlikely that rate cuts will begin in March as the market optimistically expected.
Next, we will summarize the potential events this week that may bring volatility to the market.
One of the two key inflation indicators that the Fed officials refer to when setting interest rates is the Consumer Price Index (CPI), which will be announced at 9:30 pm Taiwan time on February 13th.
According to the Fed’s real-time prediction model, the CPI is expected to increase by 0.1% monthly in January, with an annual growth rate of 2.94%. It is expected to drop below 3% for the first time in nearly two years. The core CPI, which excludes food and energy prices, is expected to increase by 0.32% monthly, and the annual growth rate will slow down from 3.9% in December to 3.81%.
Source: Fed Real-Time Inflation Forecast
The US Department of Labor has just released the latest CPI revised data on the 9th. According to Reuters, the CPI increased by 0.2% monthly in December, instead of the previously announced 0.3%. However, the data for November was revised upward to a monthly increase of 0.2% instead of the previously predicted 0.1%. The overall inflation data revision results are mixed, and it has not changed people’s expectations for the expected time of rate cuts by the Fed this year.
The CME Fed Watch data shows that Powell’s remarks have greatly dampened market expectations for rate cuts in March. The probability of the March meeting temporarily suspending rate increases has risen to 83.5%, and the probability of a one-point rate cut is only 16.5%. The probability of a one-point rate cut in the May meeting exceeds 53.5%, and the probability of a two-point rate cut is 9.1%. The probability of maintaining the interest rate unchanged again is 37.4%.
CME Fed Watch Tool May Predictive Data
In addition, the market is also paying attention to the views of Fed officials on rate cuts. This week, officials with voting rights this year, including Thomas Barkin, President of the Federal Reserve Bank of Richmond, Mary Daly, President of the Federal Reserve Bank of San Francisco, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, and Michael Barr, Vice Chairman of the Federal Reserve will all give speeches.
Bostic stated in mid-January that he would like to see more evidence that inflation is expected to reach the central bank’s 2% target. He currently expects policymakers to make the first rate cut in the third quarter, but he also added that if the decline in inflation is “significantly faster” than his expectations, he would be willing to take action earlier. Barkin said last week that four Fed officials’ remarks this week indicated that they are “not eager to cut rates.”
On the other hand, Coinbase will release its financial report this week. As the largest compliant exchange in the United States, it is highly anticipated whether it can bring corresponding business growth with the market warming up.
Other corporate financial reports to be released this week include Cisco, Coca-Cola, Shopify, Sony, and other giants.
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