New Vector of FRS Monetary Policy, USA Avoids Default

16 ธ.ค. 2021

The main event of yesterday, and what is there of the day - the whole week, if not the whole next year - is the announcement of the results of the FOMC meeting. Despite the fact that risky assets have reacted with growth, this is a good mine for a bad game. The Fed will not only accelerate the pace of tapering, but will also be extremely aggressive with regard to rates.

The FOMC member vote distribution chart shows that the baseline scenario for 2022 is 3 Fed rate hikes. Back in September, the bulk of the votes were in favor of unchanging the rate next year.

That is, we are talking about a full-fledged change in the vector of monetary policy. Markets are still at the stage of denying this fact, but the transition to anger, bargaining and depression is inevitable, as is the fall in prices for risky assets. The whole question is only in time.

It is worth noting that the Fed has been so careful in its statements over the past year that, God forbid, the bubble does not burst ahead of time, that the markets have come to believe in their invulnerability. We just have to sit and wait for the moment of Minsky. In general, the only unknown in this equation is the time - when the markets realize that the era of ultra cheap money is coming to an end and decide to incorporate it into prices.

Against this background, less noticed was the news that the United States had managed to avoid a default. Congress voted to raise the US government debt limit by 2.5 trillion. Naturally, this is not a solution to the problem, but just another postponement. Nevertheless, December 15 has passed, and the US continues to pay the bills, unlike the Chinese developers.

Shimao Group Holdings Ltd, the 13th largest developer in China, spooked the markets by announcing that its services division is going to buy another division of the company for $ 259 million - in essence, it is about pumping money from a stronger division to a weaker one, which is obvious is on the verge of default.

In total, yesterday's rise in risky assets against the backdrop of the Fed's decision is an excellent opportunity for more expensive sales. Yes, here and now the markets decided that the FOMC results corresponded to the basic expectations of the markets, but the fact of the change in the vector of monetary policy will still have to be taken into account in the price sooner or later.