The Fed is expected to raise interest rates in September, as I see it and the market expects it. If that happens, they won't be able to lower interest rates. If that happens, there may be a possibility that stock prices will spike around September. The situation in the Middle East needs to be resolved smoothly. It is currently the biggest risk. If the situation in the Middle East worsens and oil prices rise, the stock market outlook, exchange rate outlook, and interest rate outlook may all need to be revised. It seems like a time when everything might need to change.

Hello, professor.
Hello.

The Federal Reserve's benchmark interest rate has been raised. What was discussed at this FOMC meeting? First of all, the economy is growing at a solid pace. Yes. And employment is showing modest growth, but the unemployment rate, although low, is rising. This is the first time this sentence has been mentioned. So, it seems they are paying a bit more attention to employment. Yes. Next, inflation is slowing down.

Although it may be somewhat high, yes, however, from a medium-term perspective, it is an assumption that it gradually approaches 2%. This is what was mentioned. During this time, the Fed has paid a lot of attention to inflation, and inflation is progressing as expected. It seems that this evaluation has been made. The issue is that the labor market may cool down a bit, so the unemployment rate is increasing. It seems that such expressions were used. Yes, Professor. After the FOMC meeting, during the press conference, Jerome Powell hinted at a rate cut. What specific discussions were made? The Fed's monetary policy goal is maximum employment and price stability. The inflation rate is also decreasing. Next, the labor market is gradually approaching balance. Therefore, they are looking for the right interest rate or timing. Whether it is the end point is something that cannot be answered. However, interest rates and timing are approaching. Such a statement was made, and especially in the labor market, many questions were raised by reporters.

Could the job market become too cold? Reporters asked such questions, and the response was that it's not to that extent yet. The market hasn't cooled as much as the Fed expected, so they didn't cut interest rates this time. Yes, so the focus seems to be shifting from inflation to employment now. Professor, as you mentioned, the Fed currently places great emphasis on the U.S. unemployment rate and employment situation. What is the current state of the U.S. labor market? The pace of job growth has slowed down a bit. For example, tomorrow's employment figures for July are expected to be around 188,000. In June, it was 206,000. Recently, the pace of job growth has been slowing, and in the latest FOMC statement, they included the unemployment rate, which was 3.4% in April last year.

In June, it rose by 4.1%, following the Phillips Curve. For example, if the three-month moving average of the unemployment rate is 0.5% higher than the 12-month low, a recession will come. However, in May it was 4.0%, in June it was 4.1%, and it is expected to remain at 4.1% in July. So, if the moving average reaches around 4.1%, a recession is likely to come. When reporters asked such questions, the chairman said history does not repeat itself, and they will consider not only employment but also various other economic indicators to make interest rate decisions. Anyway, with the slowing down of employment growth and the rise in the unemployment rate, the Fed is likely to consider these factors significantly in their interest rate decisions. Professor, what kind of reaction did the market have after the FOMC, and with the Fed's hint of a rate cut in September, how do you think the market will move forward?

I'm curious if you have any expectations. Yes, first of all, the national bond yield has dropped significantly. The 10-year yield was at 4.14% the day before, and now it's at 4.03%. Pro bonds have surged, right? Yes, and the dollar index has slightly decreased, while stock prices have risen significantly. In particular, the Nasdaq index has recently undergone a significant correction, but it's up almost 2.6%. The S&P 500 has also risen by 1.5%. However, it seems that just by adjusting interest rates, stock prices may not continue to rise. In the future, corporate profits need to increase further. Yet, recently, the growth momentum in the U.S. seems to be slowing down. Seeing this, it doesn't seem like corporate profits will increase as quickly as the market has been anticipating. Therefore, although interest rates are falling, with the slowdown in the growth of corporate profits, the U.S. market may need to undergo some more adjustments. Of course, it's not a reversal to a downward trend but rather a slight correction in an upward trend.

I think we won't go through it. The professor mentioned that we should refer to employment indicators in interest rate decisions. He also said that we should consider inflation, employment, and unemployment rates as key economic indicators affecting interest rate decisions. What upcoming schedules should we pay attention to? First, the employment trends of non-farm payrolls, which will be announced tomorrow, are expected to increase by 188,000 according to the market. Will it actually increase by that much? Yes. I mentioned the unemployment rate earlier, which rose from 3.4% to 4.1%. Will the unemployment rate continue to rise? Yes, that's something to watch. Next, on the 13th, the U.S. consumer price index will be announced. Will the consumer price index actually enter the 2% range? In my opinion, it is likely to enter that range. Also, from the 22nd to the 24th, there will be the Jackson Hole meeting, where the Fed Chairman, Jerome Powell, will attend.

I probably will participate, but what is mentioned in the monetary policy is what I'm interested in. And then, the most important thing is the U.S. personal consumption expenditure on August 30th, which includes consumption expenditure and consumer prices. Currently, consumption in the U.S. is maintaining a steady growth, with personal income stagnant and disposable income gradually increasing. Service consumption continues to rise. Will service consumption continue to increase? And the CPI was 2.5% in June. Will it be lower in July? In my opinion, it will probably approach 2% as we go towards August. Therefore, it seems that the inflation rate is significantly slowing down. This is how I see it. Professor, the U.S. is currently facing the upcoming presidential election. I'm curious if there was any political influence on the Fed's interest rate decision in the recent FOMC meeting.

The journalist asked if even though not, are you influenced politically? Mr. Powell said, We are not influenced politically at all. We are only faithful to the duty of the Federal Reserve. The duty of the Federal Reserve is to maximize employment and stabilize prices, so we are not influenced politically. He also said that they do not consider predicting elections, economic outlook, or making interest rate decisions based on those factors. Therefore, the election results, who becomes president, even former President Trump demanded not to lower interest rates until the election, but we will not be influenced by external factors. I also don't think we will be influenced. It seems that we will decide on price declines. Yes, Professor, I would like to talk a little about Japan this time. How about U.S. interest rates this time?

In Japan, the benchmark interest rate was raised on the 31st after being frozen. I'm curious about the background of Japan's interest rate hike. Japan raised the benchmark interest rate from 0.1% to 0.25% and then mentioned that they would slightly reduce the scale of quantitative easing. They have been buying about 57 trillion yen worth of government bonds per month and said they would reduce it by about 400 billion yen per quarter. By raising the interest rate and reducing the scale of quantitative easing, Japan is indicating that its economy is recovering, especially with inflation rising. Therefore, the Bank of Japan is forecasting inflation to be 2.5% this year and 2.1% next year. Since inflation is expected to rise above 2%, they have no choice but to raise interest rates. The market is anticipating further rate hikes in the future. Professor, how do you foresee the exchange rate market in the future with Japan raising interest rates and the US lowering interest rates as a signal?

It's appearing a lot in the market. For example, on July 3rd, the exchange rate was almost 162 yen per dollar. However, it's now moving around 149 yen. One of the most crucial factors determining the dollar exchange rate is the difference in 10-year bond yields between the United States and Japan. This difference is currently narrowing. Therefore, in the future, the U.S. will need to lower interest rates, while Japan will need to raise them, and there is room for further increases. If the U.S. 10-year bond yield decreases while the Japanese bond yield increases, and the two interest rate differentials narrow, the yen is expected to strengthen. In the short term, as it has dropped significantly from 162 to 149, it may stabilize around 150, but in the medium term, the yen has peaked at 162 yen per dollar and is now entering a downward trend. This could influence our exchange rate, considering our economic strength.

Han Yoo-ri had no reason to maintain 1380 won. As the value of yen dropped, the value of Ohwa also declined. With the increase in the value of yen, our Han Yul has dropped to 1360 won. It seems that there is more room for Han Yul to fall. Along with the possibility of a rate cut in September and concerns before the confirmation of the Middle East war, raw materials and oil prices surged. I'm curious about your outlook on oil and raw material markets in the second half of the year. For example, with the U.S. economy slowing down and China growing in the mid to late 4%, it seems unlikely that oil prices will rise given the economic conditions. However, it seems that the situation in the Middle East is deteriorating quite a bit. I am quite concerned. But if the situation in the Middle East worsens and oil prices rise, it could lead to a situation where U.S. inflation may not fall and rise further. Especially, with WT prices, it may affect U.S. consumer prices.

I prepare about two months in advance, so if the situation in the Middle East worsens and oil prices rise, the inflation rate in the United States could rise again. For example, if the Federal Reserve is expected to raise interest rates in September, as I and the market anticipate, they might not be able to lower interest rates. In that case, there is also a possibility that stock prices may spike in September. The situation in the Middle East needs to be resolved well so that it does not worsen. It is currently emerging as the biggest risk, and if the situation in the Middle East worsens and oil prices rise, it seems that my stock outlook, exchange rate outlook, and interest rate outlook may all need to be revised. Therefore, it seems that there may be a time when we need to make changes. So, I think we need to keep an eye on the progress of the situation in the Middle East in the future. Thank you, Professor. Yes, thank you.

불안감 조성되는 시장, FOMC 긴급진단 [김영익의 경제스쿨]

안녕하세요, 김영익입니다. 
김영익의 경제스쿨은 시대의 흐름에 대해 이야기하는 채널입니다. 
함께 우리 경제의 흐름을 공부하고 분석하면서 좋은 시간 보냈으면 합니다. 
많은 관심과 사랑 부탁드립니다. 
감사합니다. 

[약력] 
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[비즈니스 문의]
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불안감 조성되는 시장, FOMC 긴급진단 [김영익의 경제스쿨]

불안감 조성되는 시장, FOMC 긴급진단 [김영익의 경제스쿨]

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