Now, those of you who are interested in the economy at all are going to come across the term FOMC all too often. Even in the early morning of July 27, many people waited for the announcement of the FOMC’s position. 바이비트 This is because not only the NASDAQ index, but also the Korean stock market and the global cryptocurrency market may fluctuate depending on the words of Jerome Powell, chairman of the FOMC.
Many people expected a rate hike once again following the giant step (0.75% interest rate hike) announced at the last FOMC. As a result, short selling (short position) was very dominant in the bitcoin market.
Bitcoin prices rose 13% in one day
However, the market turned upward before the announcement of the FOMC, contrary to expectations In particular, it began to rise explosively from the dawn of the 27th when the announcement was made. In just one day, more than 13% of the respondents were literally “rising.”
In a way, it seems that the forces or institutions that draw the bitcoin chart have taken advantage of the public’s psychology to liquidate the short force.
So let’s take a look at what FOMC is and what’s important that was announced on July 27.
What is FOMC?
First of all, the U.S. institution such as the Bank of Korea is the Federal Reserve. It’s also known as ‘Yeonjun’. Founded in 1913, the current chairman is Jerome Powell. Seven president-appointed and Senate-approved directors form the Federal Reserve.
Since the Federal Reserve is completely independent of the U.S. government, it is famous that there were frequent conflicts between Trump and Chairman Jerome Powell under President Trump. President Trump can dismiss Powell, but he is completely independent in his duties.
A typical thing the Fed does is issue the U.S. dollar. In addition, it is involved in the overall U.S. monetary policy, including changes in the reserve ratio, stock trading regulations, regulations on bank regular deposit rates, and decisions on the Federal Bank’s re-discount rate.
At first glance, the Fed seems like a government agency, but it is a private bank with a 100% stake owned by a private bank like JP Morgan. So there are many times when it conflicts with government policy.
FOMC stands for the Federal Open Market Committee, which controls the amount of dollars in the United States. So issuing dollars is what the Fed does and controlling the dollar in circulation is what the FOMC does.
The committee consists of 12 members, seven of whom are elected by the Federal Reserve Board and five representatives of the Federal Reserve Bank by region.
The way the FOMC controls the amount of dollars is by buying bonds from financial markets. If the FOMC determines the right interest rate and the amount of bonds to buy, the New York Federal Reserve will buy and sell bonds directly in the financial market.
If you buy a bond, the dollar is released on the market, and if you sell the bond, the dollar on the market is reduced.
The FOMC’s decision is made by 12 votes. Seven of the 12 chapters are held by the Fed’s directors, one each. The other five chapters will have 12 Federal Reserve Governors holding the right to vote sequentially.
The meetings of the FOMC are generally held about eight times a year and are held every six weeks. And the latest meeting was in the early morning of July 27th, Korean time.
July 27 FOMC highlights
The Fed carried out the same giant step (0.75% base rate hike) at the last meeting through the Federal Open Market Committee (FOMC). This reversed interest rates between the United States and Korea.
Fed Chairman Jerome Powell suggests there may be a bigger rate hike in September.
The main concern now is to control inflation in the U.S. But it’s also a problem that’s causing the economy to stagnate. Greenspan, the former Fed chairman, has already warned of stagflation in the U.S.
Jerome says the U.S. economy is not currently in recession and the job market is very healthy.
What is the situation that the Korea-U.S. interest rate reversal will bring?
A series of giant steps by the FOMC caused the U.S. interest rate to rise above the Korean interest rate. This is the first time in two and a half years.
If foreign funds move from home to the U.S. in pursuit of high interest rates, the value of the won could be lowered. If the branches of the won are lowered, the won that you have to pay for importing the same thing will increase, and there is a risk that prices will rise further.
So despite the U.S. interest rate hike, what the authorities have to manage is the outflow of foreign funds.
Deputy Prime Minister Choo Kyung-ho dismissed these market concerns at a macroeconomic and financial meeting. It refers to the fact that foreigners’ investment in domestic securities has increased even in the past three reversal cases between the Korea-U.S. interest rates. Concerns over the outflow of foreign funds will have a more impact on the fundamentals of the Korean economy and the global situation than on the interest rate gap between South Korea and the U.S.
Meanwhile, despite the reversal of interest rates between South Korea and the U.S., the Bank of Korea is unlikely to raise domestic interest rates to the level of giant steps immediately.
Lee Chang-yong, governor of the Bank of Korea, also said it is desirable to raise interest rates by 0.25% sequentially for the time being.
This is due to the negative impact on the economy if domestic interest rates are raised excessively. Analysts say that every 0.25% increase in the domestic benchmark interest rate has the adverse effect of a 0.15% slowdown in both private consumption and facility investment.
Right now, the FOMC last night doesn’t look negative.
Rather, NASDAQ, the Korean stock market, and the virtual currency market soared all at once.
As concerns over the rise of more than the Giant Step have been resolved and uncertainties have been resolved for six weeks, some predict that Bitcoin is worth expecting 25k and 30k.
But I think we still have to wait and see if it’s a complete transition to the top.
I hope you all make a good fight with a wise decision.
