【Investment fever】US heavyweight data released! Here's an emergency tip.

This week, the US equity market faced a series of tests. At 20:30pm, Beijing time, the May CPI data for the USA will be released! Next, May PPI data will be released on June 13 at 20:30pm. In addition, at 2:00 a.m. on June 13, the Fed will hold a closely watched meeting.

There may be less questions for mooers, for example: What signals will the US Fed hold information meeting send? What is the impact of the rise or fall on the market? What do CPI, PPI data look like? The beef sirens will add some dry goods knowledge to help them better understand their geography.

1. First understand the Fed: What does it do? How to do it?

The Federal Reserve is the central bank of the United States,It consists of three pillars: the Federal Reserve Board, the 12 Federal Reserve Banks, and the Federal Open Market Committee (FOMC)。 The Federal Reserve Board oversees the entire Federal Reserve System, with 12 Federal Reserve Banks scattered throughout the country, responsible for understanding the regional economy and reporting to the Board of Directors.

The members of the above two institutions together make up the Federal Open Market Committee (FOMC). The FOMC has two main responsibilities:One is the decision to shape the operation of the open market; the second is to decide by convention whether to raise or lower the federal funds rate (which is the rate increase or decrease we often hear).

After all, what is the purpose of the Fed? There are two main ones: achieve maximum employment and stable prices. How to achieve it? RelianceThe three main tools in the monetary policy “armory” are open market operations (OMO), the spot rate, and the reserve rate.

By buying and selling government securities on the open market, the Fed can increase or decrease the total supply of currency while affecting federal funds rates. In addition, the Fed can influence the willingness of banks to borrow money by changing the discount rate. By increasing or decreasing the reserve ratio, the Fed can also control the amount of bank loans.

With a variety of weapons, the Fed is able to flexibly manipulate currency supply and interest rates, apply the brakes in the face of overheating, and take stimulus measures in the event of a downturn, thereby reducing market volatility and ensuring the economy's smooth operation.

2. How does an increase or decrease in interest rates have on the market?

Under what circumstances will the Fed increase/decrease interest rates? Often, when the economy is overheating and inflationary pressures increase, the Fed decides to raise interest rates to curb inflation and prevent the economy from overheating. When inflationary pressure decreases, you may consider lowering interest rates.

So, what is the impact on the market when interest rate/decrease occurs? In addition to what is shown in the above image, bullsir is also focused on giving everyone a few more reminders about the bond market and the stock market.

A drop in interest rates will usually cause the interest rate on newly issued bonds to fall, potentially pushing up the price of existing bonds. Declining long-term interest rates may also spur investors to buyLong-Term Bondsto lock in higher returns.

At the same time, falling interest rates have reduced the attractiveness of savings to investors, and also reduced the cost of borrowing for businesses, raising expectations for corporate profits. ThisOften has a positive effect on the stock marketbecause investors may be looking for higher dividend yields or have more expectations for the company's growth.

In an environment of low interest rates, investorsRisk assets that may seek higher returns, such as high-yield bonds or emerging market assets, etc., but this can also increase the volatility of these assets.

In contrast to the impact of interest rate hikes on the market, Bull Sir has a lot to say here.

3. Is the Fed going to cut interest rates to? How to judge?

There has been a lot of information in the market recently about the expected Fed rate cut. In addition to understanding the Fed's interest rate/decrease policy in terms of fundamentals and news, bulls will introduce you to two frequently used tools today.

At the last quarterly FOMC meeting, the Federal Reserve publishes its Economic Outlook (SEP),bitmapThat's included. It adopts the method of anonymous voting, showingThe 12-member Open Market Committee's Expectations of Future Changes in Federal Funds Rate, Each Point Represents the Expectations of a Fed Official。

With bitmaps, investors can better understand how FOMC members feel about future economic conditions and thus predict the Fed's future policy.

What needs to be noted is,A bitmap is not a valid indicator for predicting changes in the Fed's interest rate, it is more used to observe Fed officials' stance on current monetary policy and not as a forward-looking tool.

In addition to bitmaps, there is a more frequently used tool on the market. That's it.CME's FedWatch Tool。

By passing the implied Fed funds rate futures that expire in the month of the conference, the implied change in interest rates from the previous month reverses the probability of a change in interest rates caused by a Fed rate increase or decrease.

It is also not a 100% accurate indicator of forecast rate increases or decreases, we use it more asObserve the market's attitude to interest rate changes frequently。

With these two tools, mooers can observe possible dipping rate changes. At the same time, Beef Sirsi has raised the world, the 13th day of the 2:00 U.S. financial information session will be held soon, and when the United States Federal Reserve Rate Decision is announced, the United States canBrowse related economic data through the Futubull APP, search for the financial calendar。

4. How to measure inflation that affects monetary policy?

From the above, you should know that the Fed's monetary policy has a great relationship between the level of inflation and the level of inflation. So how to measure the level of inflation? Below we introduce you to 2 commonly used indicators, as well as 2 upcoming heavyweight data: CPI and PPI.

Consumer Price Index (CPI)

The CPI is the most commonly used inflation metric that measures the price of a basket of consumer goods and services. The final CPI is weighted to the final CPI by giving different weight to eight major categories of consumer goods such as food beverages, housing, transportation, clothing, medical services, leisure, education & communications, and other goods and services.

The U.S. Department of Labor (BLS) publishes CPI data once a month, usually the second to third week of each month. CPI's sample selection covered approximately 6,000 housing units and approximately 23,000 retail establishments (department stores, supermarkets, hospitals, gas stations, etc.) in 75 urban areas nationwide, collecting approximately 80,000 prices.

So how do I get the CPI data?It is not only necessary to look at the trend of change over the past few years, but also to determine whether the breakdown is a cyclical change or other cause.

As an example, the following figure shows the change in CPI data beginning in 2019. It is not hard to find that CPI surged in 2021, led by higher energy and commodity prices, and even hit a 40-year high in June 2022.

In addition, energy and food have always been relatively high in the CPI component.If only the CPI indicator is observed, it may cause monetary authorities to change interest rates more frequently。 Therefore,Core CPI is an indicator that is formed after excluding energy and food prices on top of the CPI。

At the same time, the Labor Bureau will publish CPI peers and core CPI data. Investors can combine these three dimensions to observe inflation.

Producer Price Index (PPI)

The Producer Price Index is a measure of the average change in a producer's output price over time and is an index of inflation from the industrial and commercial point of view.

As the name implies, PPI measures prices based on the initial sales of a product or service, while CPI focuses on final sales. Due to the upswing in production and consumption, when producers face rising costs, this part is often transferred to retailers and consumers.

Therefore, PPI data from the producer point of view is usually ahead of CPI data from the consumer point of view, and PPI data is also used in the market to predict inflation.

PPI data is also published monthly by the U.S. Labor Department, and the time is usually one day late for CPI data.

Of course, these two data cannot give a complete answer, and everyone also needs to combine information such as market expectations for inflation movements to help form their own investment decisions. Bull sir once again reminded that for the upcoming CPI and PPI data, everyone canUse the Futubull APP to search for your financial calendar.

Okay, the above is what bull sir is bringing to everyone today, wondering if it will help you better understand the weighty data that will be published soon? If you have any thoughts or questions, see us in the comments section!

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