In the early hours of Thursday morning Beijing time, the Federal Reserve announced its November interest rate resolution, deciding to raise the target range for the federal funds rate by 75 basis points to 3.75%-4.00%, the fourth consecutive sharp 75 basis point rate hike since June, with the interest rate level then rising to a new high since January 2008. Fed Chairman Jerome Powell said at a subsequent press conference that the pace of rate hikes may be reduced in December, but that the rise in short-term inflation expectations is a concern, that it is premature to pause rate hikes, and that the ultimate target for its policy rate may be higher than previously expected. For outside concerns about the risk of recession, Powell said that although he believes that the Fed “may still” achieve a soft landing, but the road has “narrowed”. Powell about the final interest rate target may be higher than expected and the pessimistic statement of a soft landing became one of the triggers of the end of the dive in U.S. stocks, international gold prices rushed back down, the dollar index back to the 112 mark, U.S. bond yields rose to a two-week high.

　　Come to see the impact of the Federal Reserve rate hike on the cotton market, due to the large rate hike has been digested in advance, the resolution was released after the negative landing, the first three contracts in the U.S. market are up, other contracts also rose to varying degrees. And look back at the five times since this year’s more substantial interest rate hikes, ICE cotton futures and Zheng cotton four times then rose, of which the foreign market rose basically more than the domestic market, while the biggest increase in the foreign market after this rate hike, the New York period has been two consecutive days of stop quotes, which continued to fall close to 70 cents / pound in the early part of the market, and is expected to slow the pace of interest rate hikes after the Fed in November, the market low buying into the market and other factors Related to the June rate hike and tapering plan after the market is down. And from the Fed rate hike after a longer period of market trends, in addition to the July rise in the follow-up, the rest of the various rate hikes have become market demand is expected to weaken, cotton prices continue to fall as the main driving force.

　　This Fed rate hike will perhaps be the last significant rate hike in the current round, but the interest rate endpoint may be higher than expected. According to the Chicagoland CME Interest Rate Watch tool, the market currently expects the current rate hike cycle to top out in May next year, with an interest rate range target of 5.00%-5.25% and the median terminal rate rising to 5.08%. The Fed will avoid the mistake of not tightening enough or exiting tightening too soon. This series of statements to the market to release the signal is: tightening although there is a slowdown, but also do not have doubts about our determination to raise interest rates. The recent rise in crude oil and food prices or stable trend, high inflation in the United States is difficult to ease significantly in the short term, while the United States will usher in the mid-term elections this month, so the Fed will continue to express the determination to reduce inflation, but also can not let the economic data to a sharp decline in the situation, which may also be the statement “both loose and tight” of the The contradiction lies. And its impact on the cotton market, the downward pressure is expected to be less than the previous interest rate hikes, but the overall interest rates rise, the balance sheet tightening, residential consumption is still a long-term suppression. The U.S. government also recently announced $4.5 billion in aid to help lower heating costs for American families this winter and $9 billion in state funding from the Inflation Reduction Act to improve home energy efficiency in order to win the midterm election. With the government’s money “pulling votes,” it is expected that the short-term recession is expected to slow slightly, but the long-term trend is difficult to shift.
News source: Textile Network