The Fed maintains interest rates unchanged, global follow on Japan's interest rate hike

The Fed decided to keep the interest rate unchanged at the FOMC meeting held this month, while raising future GDP expectations and lowering inflation expectations. In addition, Japan's first interest rate hike in 17 years has attracted global attention, but analysts believe that the upcoming rate cut cycle by the Fed may offset its impact. European investors are also betting on rate cuts. Although the cryptocurrency market is temporarily in a correction, analysis from the supply side indicates that there is still ample upward momentum.

On March 20, the Fed announced that it would keep the target range for the federal funds interest rate unchanged at 5.25% to 5.5%. Despite the CPI data for February being slightly higher than expected, the Fed chose not to raise interest rates. This is the third consecutive time the Fed has maintained the interest rate. The market generally believes that the rate hike cycle has ended. However, the Fed stated that there is currently "no need" to cut interest rates.

The Fed has raised its GDP growth forecasts for 2024 to 2026 to 2.1%, 2.0%, and 2.0%, respectively, while lowering the unemployment rate forecast for 2024 to 4.0%. Future interest rate cuts may only be considered after a softening in the labor market.

In terms of manufacturing data, U.S. manufacturing activity in March recorded the largest increase since mid-2022. The S&P Global March U.S. Manufacturing PMI preliminary reading was 52.5, remaining above the neutral line of 50 for three consecutive months. Driven by improvements in domestic and foreign demand, manufacturing output growth reached the strongest level in nearly two years, and employment indicators hit an eight-month high. This reflects the strong performance of the manufacturing sector in the current economic environment.

Overall, the main economic data from the United States indicates that there is currently no need for a rate cut. Although the Fed previously stated that it plans to cut rates three times within the year, the market expects that there is a high probability that there will not be a rate cut in May.

In Japan, the first interest rate hike this month has attracted market attention. For a long time, the yen has been favored by overseas speculators as an arbitrage tool due to negative interest rates. This rate hike may lead speculators to sell foreign currencies to buy back yen, raising concerns that this will drain liquidity from the international market. However, analysts believe that the impact of Japan's rate hike on the market is more about "psychological panic," as international capital had already anticipated it. Additionally, with the Fed about to start a rate cut cycle, it is expected to alleviate liquidity concerns.

This month, the three major US stock indices have repeatedly hit new highs, but some investors have begun to take profits. The AI-related sector remains the core driving force, but leading stocks like NVIDIA have seen a pullback. However, based on the performance of companies like Micron, the AI investment frenzy continues. In Europe, as US stocks stagnate, European markets are performing strongly, mainly because investors are betting that the European Central Bank will also follow the Fed in cutting interest rates.

The cryptocurrency market has experienced significant fluctuations this month, with Bitcoin briefly hitting a new high of $73,000 before pulling back. The capital flow of spot ETFs has a noticeable impact on the market. On-chain data indicates that this pullback is primarily due to retail investors selling off, while high-net-worth investors have not significantly reduced their holdings. From a supply-side analysis, as the halving approaches, rising mining costs will become an important factor driving the long-term increase in Bitcoin prices.

In addition, Ethereum has once again been classified as a security by the SEC, but the CEO of BlackRock stated that there is still a possibility of launching an Ethereum ETF. Currently, 8 institutions have applied for an Ethereum spot ETF, and the SEC will make a decision in May.

Overall, despite some uncertainties, global investors remain optimistic about the interest rate cut cycle. Although the cryptocurrency market has experienced volatility, the long-term upward trend remains unchanged. The market still needs to closely follow the policies and regulatory trends of various central banks.