Thursday, Sept 21, 2023
the Fed surprise, the impact on bitcoin, Mt. Gox delay, Tether fud (again)
“No people in history have ever survived who thought they could protect their freedom by making themselves inoffensive to their enemies.” – Dean Acheson (no relation!) ||
Hello everyone! Geez, the day I have to keep this short because of a scheduling squeeze is the day there is so much to talk about! I mean, I guess I should have known…
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IN THIS NEWSLETTER:
The Fed has spoken – why the surprises matter
Why BTC held up, until it didn’t (perhaps the partial explanations rhyme with Mt. Sox and Feather)
WHAT I’M WATCHING:
The Fed has spoken
Yesterday, the Fed chose to not raise interest rates, in line with market expectations. The surprise came in the economic projections, and the dot plot which details each member’s view on where interest rates will land at the end of each of the next few years.
Why it matters:
If it walks like a hawk and talks like a hawk, maybe it is a hawk.
I sat down in front of Chair Powell’s press conference last night expecting it to be more of the same, but there were plenty of surprises. But these started with the release of the updated Summary of Economic Projections, which details shifts in expectations since the last update in June:
(table via the Federal Reserve)
1) First and foremost, there’s the expectations for the fed funds rate at the end of 2024. I said yesterday that I expected these to be raised slightly to send a message. I was wrong, they were raised a lot. In lifting the forecast for end-2024 fed funds from 4.6% to 5.1%, the FOMC is effectively taking two rate cuts off the table. This screams “higher for longer” much more than words can (and there sure are a lot of those from Fed officials these days).
The markets listened: stocks plummeted, bond yields jumped, the dollar rose. Note how the longer-duration, more interest rate-sensitive indices underperformed. Strangely, bitcoin seemed like an oasis of calm in comparison (more on this later).
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