The Fed's Ultimate Harvest Has Arrived.
Just a couple of days ago, the latest minutes of the Federal Reserve's meeting were released, delivering a heavy blow to global investors and signaling another turn!
According to these minutes, the Fed is quite dissatisfied with the current inflation data, and if the cooling is not apparent enough, it is ready to consider raising interest rates again.
Not only is there no rate cut, but now there is consideration of raising rates; the Fed's change of face is too swift.
The Fed's Dramatic Turn, What's the Purpose? Heavy Metal Prices Like Gold, Silver, Copper, and Aluminum Plunge, Why Isn't the Yuan Afraid?
The Fed Makes Another Turn
Having experienced this round of interest rate hikes, I believe everyone has already recognized what kind of master of expectation management the Fed is.
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You think I'm preparing to cut rates? Sorry, I'll soon be hawkish outwardly, actually, I'm preparing to raise rates.
To exaggerate, let's call it the "Schrödinger's Fed," which is all about adaptability.Take a close look at the latest Federal Reserve meeting minutes, and you can probably extract three core points:
First and foremost, of course, is the interest rate. As expected, the Federal Reserve continues to maintain interest rates at a high level of 5.25%-5.50%.
Even the most daring investors have never thought that the Federal Reserve would start cutting interest rates in May, so the Federal Reserve's continued maintenance of the current interest rate is still a routine operation.
Secondly, the Federal Reserve has begun to show its true colors, citing inflation data and being hawkish again.
The Federal Reserve has previously emphasized countless times that the ultimate goal of raising interest rates is to control inflation to 2%, and it will not give up until it reaches the end of its means.
As a result, this inflation is far more stubborn than the Federal Reserve imagined, and the rate of inflation decline is far slower than previously expected, especially the core CPI data that the Federal Reserve values more, which is also far from expectations.
This means that the Federal Reserve is likely to implement a more contractionary monetary policy, trying every means to bring down inflation data.
Finally, the number of possible interest rate cuts has decreased again:
The policy interest rate path derived from futures prices indicates that the number of times the Federal Reserve will cut interest rates by 25 basis points before the end of the year is less than 2 times, and it may only cut interest rates once this year, or even not cut at all.
It should be noted that at the beginning of this year, the market unanimously speculated that the Federal Reserve would cut interest rates at least 3 times this year. Now the situation has changed dramatically, and the Federal Reserve has turned one bend after another. This operation is really showy.Why Isn't the Chinese Yuan Afraid of Harvesting?
When the Federal Reserve stamps its foot, the quickest to react this time is the global precious metals market, which trembles along with it.
Now, the Federal Reserve is visibly becoming more hawkish, with the US dollar continuing to strengthen, and a host of precious metals experiencing a comprehensive plunge.
Relevant data shows that on the day the Federal Reserve released the minutes of the interest rate meeting, COMEX gold fell by 1.80%, to $2,382.3 per ounce, and London gold reported $2,378.506 per ounce, down 1.78%.
In addition, other precious metals followed suit, with copper plummeting by 6%, silver falling by nearly 4%, aluminum by nearly 3%, nickel by 4%, and palladium by over 3%.
The Federal Reserve's policies change at the drop of a hat, but ultimately, it is still to continue the previous harvesting strategy.
Everyone should have heard that this round of harvesting was not favorable, and not long ago, the Federal Reserve turned its attention to Asian countries.
With the Federal Reserve's continued hawkish stance and the strengthening of the US dollar, almost all Asian currencies, except for the Chinese yuan, have experienced a sharp devaluation, prompting many Asian countries to rise up in resistance and finally temporarily block the dollar's attack.
Now the Federal Reserve is making another move:
If once doesn't work, then try twice; I'm determined to mow the lawn, and we'll see who can't hold on first!Speaking of this, what everyone cares about the most should still be the Chinese yuan. Facing the ultimate harvest by the Federal Reserve, why is the yuan not afraid at all?
On the one hand, this is related to our special exchange rate control mechanism. More than a month ago, we had already set the central parity rate within 7.1. The yuan exchange rate fluctuates up and down around the central parity rate by no more than 0.2%. So even if the yuan falls further, it will not exceed 7.3 at most.
On the other hand, and more importantly, we have ample foreign exchange reserves in our hands. The ammunition is not ordinary, and we have enough ability to stabilize the yuan exchange rate.
According to the latest statistical data from the State Administration of Foreign Exchange, as of the end of April this year, our country's foreign exchange reserve scale is as high as 3,200.8 billion US dollars, still maintaining above 3 trillion US dollars.
So facing the harvest by the Federal Reserve, our mentality has always been very stable. The yuan exchange rate will not fluctuate excessively, and will remain stable for a long time.
The ultimate harvest is a danger but also an opportunity.
Faced with the United States' repeated harvests, many countries have always been in a state of anger but dare not speak out:
They know they are regarded as leeks by the United States, and have been harvested again and again. However, they have no power to fight against the dollar hegemony and can only lie on the chopping board obediently, being wantonly slaughtered by the United States.
But as the situation evolves, the current situation has gradually shown some subtle changes:Since the world has long suffered from the dominance of the US dollar, is there a possibility that this could be a great opportunity for other currencies to internationalize?
Or to take it a step further, could we possibly use this opportunity to elevate the internationalization of the renminbi to a higher level?
The answer is undoubtedly yes.
The Federal Reserve has repeatedly harvested global wealth, and the most severely affected are the economically underdeveloped countries.
The reason is quite simple: these countries already have weak economic strength, and their ability to withstand risks is naturally quite average. Once the US continues to raise interest rates, it is easy to trigger a liquidity crisis, forcing them to sell off high-quality domestic assets to pay off debts.
Therefore, a significant number of these countries are potential users of the renminbi and are key to promoting its internationalization.
However, to gain recognition for the renminbi, there are two internal strengths that must be achieved:
Firstly, the exchange rate of the currency itself must remain stable; otherwise, what's the difference between it and the US dollar? It would simply be replacing one overlord that feeds off you with another.
We have already made it very clear on this point: the renminbi is as stable as an old dog, and no currency can match its stability in terms of purchasing power, with absolutely no issues at all.
Secondly, there must be strong scalability, which means that when used in the global market, you should be able to purchase what you want.It should be recognized that China's reputation as the "world's factory" is not without merit, and its performance in this regard is certainly not lacking, especially as channels to Middle Eastern countries are opened up, allowing the yuan to be directly used to purchase oil, which greatly enhances the yuan's extensibility.
It is also from this perspective that the Federal Reserve's ultimate harvest has its pros and cons. The downside is that the global economy is under pressure, and we are inevitably affected. However, at the same time, this is a great opportunity for the internationalization of the yuan, which can be accepted by more countries through this opportunity.