Are Investors Ignoring The Federal Reserve’s Warning? Review Fed Chair, Jerome Powell Speech On CNN 25Th June 2023.

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Hi Guys!

"Inflation and consumer Price Index has been our major concern lately. Since both two entities have been the most predominant determiner and driving force in the World’s market. When it comes to Inflation and CPI we can't talk about it and exempt Federal Reserve System. Federal Reserve, FED for short is the Central Banking System of United State. It was established in 1913 after a series of Financial crises of Global market has been experienced. To mitigate this Global Financial crisis or manage it to minimal, FED was then founded to regulate the monetary system. FED-Wikipedia


FED is the most powerful Institution in the World. It was purposely founded to aid or support Global stability of monetary system, safeguard the various Countries from losing excess money and to also offer flexibility of Finances. There are 7 board members with 12 Regional Federal Banks including their Presidents who made up of very strong FED.

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Federal Reserves have the following summary of duties:

• FED conduct national monetary policies

• FED supervise and regulate Banks

• FED maintain financial stability

• FED provide Banking Services

• FED give financial support to Banks


"One major regulations FED hold is the regulation or managing interest rate of the Global Economy. Interest rate and the Consumer Price Index has been review being the most driving force of the development of the Global Economy, there is the need to monitor the ripple effects in the Economy. United State has been the Influencer and the Re-enforcer when it comes to the Federal Reserves, since it is where the FED System was founded. Over the years, FED have been doing well in terms of regulating the Economy’s Interest Rate, despite the fact that, sometimes the Global Economic Data can sometimes trigger markets irregular movements. The interest rate this year has been very erratic pushing the Investors at very tight corner." FED-Investopedia


Just today being 25th June 2023, the FED Chair, Jerome Powell in CNN New was announcing the “likelihood of interest rate being Hike” twice this year. It wasn’t clear to the investors of most categories of markets, like Stocks, Cryptos and other investors in Financial Institution since this statement is presumed the interest rate would be increased. Before this announcement by Jerome Powell, meeting was held on Wednesday and Thursday to announce the fight of the interest rate. But Powell disclosed his sentiment about the rising of the interest rate and his intension to bring it down to 2%. In relation to this Standard and Poor known as S&P 500, Dow Jones Industrial Average and Nasdaq all shown decline 1.4%, 1.7% and 1.4% respectively. Meanwhile, we saw these stock bullish within last week. I must say this might be a temporary correction to gather extra momentum to continue the repulsive moves. Obviously, market structure hasn’t been stagnant at one side moves it has to make that pendulum moves before it takes it direction.


Reflecting Jerome Powell intention to reduce the rate to 2%, with the little drop of Stock it explains the fear of Investors withdrawing their funds instead of staking for market to correct its self. Especially the Novice investors would always be panic upon seeing little fall of their funds in the market. If these Investors pull out their funds, of course there is going to be shortage of funds and this would lead to another problem.

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I was thinking why FED Chair, Jerome Powell was saying that “the price could hike twice this year and his intention to reduce price to 2%!” To my understanding, if interest rate is raised for 2%, since the Global Economic status isn’t stabilize, but due to economic hardship, the rate has to be reduced temporary for people to be a little relief from the pressure. If things stabilize, Powell and his team can choose to increase it 1% for the first quarter and another 1% for the second quarter. This would probably fix that 2% reduction. But this is just my speculation of the kind of method that FED is going to apply. But probably it might be more that what I’m thinking here. We should remember that one of the function of FED is to regulate financial stability to prevail in the Global Economy. So, decreasing the rate by 2% and increasing it twice the same year in the FED’s economic perspective is the best way to sustain the Economic crisis.

There is speculations that FED assumption to increase the interest rate by 2% is just to scared the Investors in the market to prevent the volatility rate in the market. The analogy here is that if the interest rate is reduced by that 2%, definitely, people would be encouraged to buy more assets into their portfolio and this would turn to increase the volume in the market. But when the inflation or interested rate is hike it would discourage people from buying more assets into their portfolio. FED is noted to regulate the Banks in order to perform well. Taxes and interest rates are regulated to support number of development and projects of the Global Economy. Such support are offered when there is certain disasters in the Global Economy. There are more things to learn in this FED New in the next update. Thanks for your attention!

References:

Are Investors Ignoring Federal Reserve's Warning?

FED-Wikipedia

FED-Investopedia

LeoGlossary

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