The stronger-than-expected U.S. non-farm payrolls report led to another round of sharp volatility in U.S. stocks on Friday (2nd), which Allianz chief economic adviser Mohamed El-Erian said made the Federal Reserve ( Fed Chairman Jerome Powell and other officials have learned yet another lesson that the Fed must be very careful with its messaging to reduce volatility.
U.S. employment growth in November far exceeded market expectations. U.S. stock indexes fluctuated after opening lower on Friday (2nd). As the Federal Reserve’s “megaphone” reiterated that it is expected to raise interest rates by 2 yards in December, bargain hunters settled in, and U.S. stocks ended The decline in the market has converged,Dow JonesThrilling red 34.87 points, S&P,That fingerblackened slightly,fee halfdown more than 1%.
In this regard, Il Erlang believes that the Fed’s communication has once again exacerbated excessive market volatility, because the Fed and the financial market have not listened to each other’s signals.
In a dovish signal Wednesday in a speech at the Brookings Institution, Powell said the Fed’s slowdown in rate hikes could happen as soon as its December meeting, but warned that despite rising inflation Some promising developments, but the road to higher rates is still a long way off to restore price stability.
“While Chairman Powell tried to maintain a hawkish, dovish balance in his speech on Wednesday, he did not in any way counteract the remarkable rebound that the market has seen, although he said some things, including warnings about inflation. , but he doesn’t realize where the technicals are in this market. He doesn’t realize what’s wrong with the behavior, which is why the stock market is overreacting.”
Il Allan believes that Powell’s unequivocal statement on Wednesday that the time to slow the pace of rate hikes may be at the December meeting is dynamite. Markets have turned a deaf ear to Powell’s warnings about terminal interest rates that the Fed has more to go in the fight against inflation and warnings that it won’t ease policy too soon.
Markets are focusing on what they want to hear, not the Fed’s warnings, which is bad for the health of the U.S. and global economies, Il-Airan said.
Il Erlang expects the Fed to direct the public’s attention to raising interest rates above 5%, but this will be quite tricky and the Fed will have to be very careful in its messaging to reduce volatility as the Fed is trying to curb the worst rate hikes in 40 years. Torn between hyperinflation and preventing the economy from rapidly slipping into recession.