The Dow Jones plummeted by more than a thousand points, and Taiwan stocks fell by more than 2.3%... After the annual meeting of the global central bank, the stock market was in disaster. What did Powell say? | Anue Hugh - Magazine

Written by Chen Yifen

At this year's annual meeting of global central banks, Fed Chairman Powell drew lessons from the experience of the United States in fighting inflation in the 1980s, saying that the Fed will continue to raise interest rates and maintain high interest rates for a period of time. However, the implementation of the quantitative tightening plan, which started in June this year, has fallen far behind expectations, which has also greatly increased uncertainty.

The annual meeting of global central banks has always been regarded as an important venue for the chairman of the US Federal Reserve to announce the basic direction of future monetary policy. Jerome Powell, the current chairman of the Federal Reserve, is of course well aware of this matter, and he also understands how impressive the 10-minute conversation was. The former chairman of the Federal Reserve is also very cautious, word by word, and without emotion.

10 minutes of conversation buried more uncertainty
Manager: My investments will be more conservative

However,Dow JonesThe S&P 500 fell by more than 1,000 points, and the S&P 500 index fell by more than 3%.NasdaqThe index tumbled more than 4%..., the first "disaster" since Powell's speech at the annual meeting of global central banks on August 26.Even after the precipitation of the weekend and holidays, Asian stocks opened on Monday morning, Japanese stocks plunged 2.6%, Taiwan stocksweighted indexIt also broke the 10,000-50 level, down more than 2.3%.

Did Ball do it on purpose? It is indeed possible that in his speech, in his robot-like indifference, he read out a set of policy directions with "inflation" running through the audience, known as "extremely hawkish". But having said that, financial markets had long expected that the speech would not have many good words. After all, in the minutes of the Fed meeting at the end of July, released on August 18, officials have stated that "the rate hike will continue until inflation. A clear slowdown" hawkish stance.

"The hawkish attitude is not a big problem. The trouble is that Ball's announcement seems to be certain, but in fact it has buried more uncertainty. At least for me, it will make future investment decisions more conservative." Named fund managers say so.

That day, like most fund managers, he immediately followed Ball’s conversation, “In short, an inexplicable brand-new term, plus a question of ‘that should be explained but not explained at all’, made up a question about the future funding environment. Bigger question mark."

I want businesses and individuals to ignore inflation
It will only make it harder to predict interest rate movements

The new term is called "rational neglect" (Rational inattention). "How does current inflation affect future inflation? A useful explanation is the concept of 'rational negligence,'" Ball said.

If they hadn't been keeping an eye on the relevant reports issued by the Federal Reserve, most people would have been selective and negligent about this difficult term. In fact, the term "rational negligence" only quietly appeared in an investigation report by the Federal Reserve Bank of Richmond at the end of March this year.

The purpose of the report was to explore "whether business decisions have been influenced by inflation expectations," and judging from the survey results at the time, the answer was yes. From July last year to January this year, not only have companies paid more attention to inflation, but they have also incorporated inflation into economic decision-making.

Source: "Today Weekly" No. 1341
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