On Wednesday, March 16, at the Fed's FOMC monetary policy meeting, the Fed announced its first interest rate hike since December 2018, by 25 basis points. Investors focused on the number, magnitude and QT of future rate increases.

At 02:30 in the afternoon in the eastern United States, Federal Reserve Chairman Powell attended a press conference, focusing on the Fed's policy statement that "inflation remains high, energy prices are rising and the economy is facing broader price pressures." it also said that the contraction table would start as soon as May.

He acknowledged that it was appropriate to continue to raise interest rates, that inflation was still well above the 2 per cent target and that high inflation would last longer than expected, but that the possibility of a recession was not particularly high. He stressed that the Fed's basic duty is to keep prices stable and will do so more quickly if appropriate.

After the release of the FOMC statement, the yield curve of the US 10-year Treasury note was upside down and the yield on the 30-year Treasury note fell, suggesting that the market was worried about the Fed's policy mistakes. After Powell assessed the risk of recession, the S & P market and the Dow rose again.

Powell commented on inflation: the Fed's basic obligation is to restore price stability and will take necessary action if inflation does not ease.

Mr Powell devoted much of his question-and-answer session to responding to inflation and reiterated that "the Fed will ensure that high inflation does not become entrenched". He said it was "worrying" that inflation in some services had returned to pre-epidemic levels and that there were signs that it was spreading more widely.

The Fed continues to view US inflation risks as "upside", with officials' expectations for inflation rising sharply, with a median inflation expectation of 4.3 per cent this year, and even the inflation trajectory by 2024 is "significantly higher than the forecast in December".He believes that high inflation will last longer than previously expected and that inflation may take longer than expected to return to the Fed's price stability target.

He believes that the conflict between Russia and Ukraine is putting "a little bit" upward pressure on US inflation in the short term, as it leads to higher oil and other commodity prices and perpetuates supply chain problems.The Fed expects inflation to remain high until the middle of this year, but still believes that inflation will be accompanied by the base effect and the lagging impact of monetary policy, and will "start to fall sharply in early 2023" until it returns to its 2 per cent target.

He stressed that "sustained maximization of employment requires price stability" and that "firmly restoring price stability is the current basic obligation of the FOMC." It is therefore appropriate to continue to raise interest rates further, and the Fed believes it can maintain a strong labour market while restoring price stability:

The Fed is reviewing US inflation data on a report-by-report basis, looking for signs of month-on-month decline in inflation. If inflation does not ease, a number of necessary actions will be taken, price stability is a necessary target and a prerequisite, and appropriate tightening of monetary policy can suppress inflation. "

He also said that the labour market was extremely tight, the job market was "unhealthily tight", wages were growing at the fastest pace in years, and if sustained, wage growth would be well above the 2 per cent inflation target. But he believes that the "mismatch between supply and demand" in the US labour market is not the wage-price spiral that the central bank fears more and unanchors inflation expectations.

Powell commented on the economy: the possibility of recession next year is not particularly high, and the situation in Russia and Ukraine poses a downside risk to the US economy.

In terms of market performance, traders are worried that the Fed's policy mistakes will plunge the US economy into recession. Asked such questions, Mr Powell said that "the likelihood of a recession next year is not particularly high" and that all signs are that it is a strong economy with strong aggregate demand, which most forecasters expect to continue.

He said that FOMC officials still expect the US economy to grow steadily and that the risk of recession is not particularly prominent.Against the backdrop of a strong economy, the labour market is extremely tight, allowing the US economy to cope with repeated interest rate increases by the Federal Reserve.

However, he also acknowledged that the situation in Russia and Ukraine poses a downside risk to US economic activities, the impact on finance and economy is highly uncertain, and fluctuations in financial markets may tighten credit conditions and affect the real economy.

Powell reviews policy: interest rates are expected to rise by 7% this yearThe shrinking table is equal to an additional increase in interest rates, which will be accelerated if interest rates need to be raised more actively.

In commenting on the policy of raising interest rates, Powell repeatedly reiterated that "if the data show a need for more aggressive rate increases, then the Fed may speed up its plan". The time for raising interest rates has come and "it is time to move towards a more normal environment".

Every remaining FOMC meeting this year is likely to make policy changes, he said, with "each meeting (not in autopilot mode) on-site". There are seven FOMC meetings from March to December this year, and the Fed currently expects to raise interest rates seven times, and the shrinking policy launched this year is "likely to amount to another increase in interest rates".

He noted that some officials believe that the Fed's benchmark interest rate is higher than the neutral rate at the end of the year, and the bitmap also suggests that real interest rates minus inflation will tighten next year. As the Fed adjusts policy, financial conditions will tighten further and spread to the real economy:

"We will focus on the changing economic and geopolitical situation, and if we do conclude that it is appropriate to accelerate action to remove loose support, then we will do so. I'm not entirely sure at the moment, but it's definitely one of the possibilities to get through the year. "

In evaluating the shrinking table, Powell repeated the wording in the policy statement, that is, "the plan for shrinking the table will be announced at a subsequent meeting." The March meeting made "extraordinary progress" on several parameters of the balance sheet, possibly as early as May.

The shrinking framework will be similar to the one from 2017 to 2019, he said. "people will look familiar."But progress will be faster, and the austerity cycle will start "much earlier" than last time, details of which will be announced in the minutes to be released in three weeks' time:

"the balance sheet framework is all about anchoring inflation expectations at 2 per cent. In making decisions on interest rates and balance sheets, we will focus on the broader context of the market and economy and will use tools to support financial and macroeconomic stability. "

The bitmap implies that interest rates will be raised seven times this year, in line with market expectations.It is still possible to raise interest rates by 50% per month.1 basis point

The bitmap shows that officials believe there will be six more interest rate increases this year, that is, 25 basis points for each FOMC meeting for the rest of the year, and the benchmark interest rate may rise to 1.9 per cent by the end of the year. This is also in line with market expectations.

Officials also expect three interest rate hikes in 2023 and no more by 2024. Traders still believe there is a 50 per cent chance of a big one-time hike of 50 basis points in May, analysts said. Some Fed officials have also hinted at the possibility of aggressive action if inflationary pressures persist.

The meeting statement pointed out that from the "Fed pigeon" to the hawkish St. Louis Fed Chairman Brad voted against this time, asking for a 50 basis point increase in interest rates.

In response, CICC had expected that because of the recently released strong non-farm payrolls and CPI inflation figures for February, St. Louis Fed Chairman Brad or Fed Governor Waller might propose to raise interest rates by 50 basis points, thus voting against the 25 basis points decision. If there are 1-2 votes against it, even if it will not change the decision to raise interest rates, it will be interpreted by the market as a hawkish signal.

The statement removed the negative impact of the epidemic, stressed that inflation remained high and wider, and that Powell might retain the option of raising interest rates sharply.

The statement deleted the words "the reopening of the US economy has led to high inflation" and the risks of the epidemic to the economy, continued to recognize that economic activity and employment indicators remained strong, and added recognition that "the imbalance between supply and demand keeps inflation high and faces broader price pressures."

The statement still expects inflation to return to the 2% target, saying that "it is appropriate to continue to raise interest rates." in the short term, the situation in Russia and Ukraine may put additional upward pressure on inflation and drag down economic activity, and the impact on the US economy is highly uncertain. The Fed stands ready to adjust policy appropriately.

Bank of America Corporation analyst Ralf Preusser believes thatPowell will provide limited guidance on the prospect of raising interest rates: he will emphasize increased uncertainty, reliance on economic data, and retain interest rate increases when needed50The option of a single basis point.

Betsy Duke, former Fed governor, warnedIf the Fed raises interest rates by 50%A basis point will be a "A sudden alarm. "To send a signal to the market that the Fed seriously misjudged the inflation situation and did not make an appropriate policy response.It means that interest rates will rise by more than currently expected.

Wall Street has mentioned that Jefferies Chief Financial Economist Aneta Markowska believes that the Fed's current cycle of raising interest rates faces double risks: downward pressure on economic growth and upward pressure on inflation. If inflation expectations rise, Mr Powell will face a difficult choice between continuing to tolerate higher inflation or raising interest rates high enough to plunge the economy into recession.