Why Markets Viewed the Fed's Latest 75 Basis Point Hike as 'Dovish'

The Breakdown

Blockworks

Investing, Business

4.8 • 786 Ratings

🗓️ 29 July 2022

⏱️ 19 minutes

🔗️ Recording | iTunes | RSS

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Summary

This episode is sponsored by Nexo.io, Chainalysis and FTX US. Yesterday was “Fed Day” and the U.S. Federal Reserve announced its second 75 basis point interest rate hike in a row. Despite the fastest pace of monetary tightening in a generation, markets rallied after Chair Jerome Powell’s presser. On today’s episode, NLW explains why so many in the market interpreted the Fed’s Q&A as dovish, and what it means going forward. - Nexo is a security-first platform where you can buy, exchange and borrow against your crypto. The company safeguards your crypto by relying on five key fundamentals including real-time auditing and insurance on custodial assets. Learn more at nexo.io. - Chainalysis is the blockchain data platform. We provide data, software, services and research to government agencies, exchanges, financial institutions and insurance and cybersecurity companies. Our data powers investigation, compliance and market intelligence software that has been used to solve some of the world’s most high-profile criminal cases. For more information, visit www.chainalysis.com. - FTX US is the safe, regulated way to buy Bitcoin, ETH, SOL and other digital assets. Trade crypto with up to 85% lower fees than top competitors and trade ETH and SOL NFTs with no gas fees and subsidized gas on withdrawals. Sign up at FTX.US today. - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell and research by Scott Hill. Jared Schwartz is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsors is “The Now” by Aaron Sprinkle. Image credit: Drew Angerer/Getty Images, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8.

Transcript

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0:00.0	Welcome back to The Breakdown with me, NLW.
0:09.2	It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world.
0:14.8	The breakdown is sponsored by nexo.io, chain aliasis, and FtX, and produced and distributed by CoinDesk.
0:22.9	What's going on, guys? It is Thursday, July 28th, and today we are asking, how come markets
0:30.3	viewed the Fed's latest 75 basis point hike as dovish? Before we get into that, however, if you
0:37.3	are enjoying the breakdown,
0:38.7	please go subscribe to it, give it a rating, give it a review, or if you want to dig deeper into
0:43.4	the conversation, come join us on the breakers discord. You can find a link in the show notes
0:47.9	or go to bit.ly slash breakdown pod. Lastly, a disclosure as always. In addition to them
0:53.7	being a sponsor of the show, I also
0:55.5	work with FTX. All right. So yesterday was Fed Day, the big event that markets hang onto, like
1:04.0	a kid with Christmas or something. And before we get into what happened, I think we need to do a super
1:10.0	fast synopsis on where we are.
1:12.4	We are currently in the midst of the most significant monetary policy shift in a generation.
1:18.4	The Federal Reserve had up to this week raised rates three times this year, and is doing so at the fastest pace since the 1980s.
1:26.2	The goal, of course, is to curb the tide of inflation
1:29.6	before it becomes endemic, and specifically before expectations about future inflation become
1:36.6	entrenched to the degree that people start acting like inflation will be with us forever.
1:41.6	The reason this matters is that inflation can be a self-fulfilling prophecy.
1:46.8	If people expect prices to keep going up over the medium and long term, it makes rational economic
1:52.5	sense to buy more today before those price increases happen. Indeed, this is clearly on their
1:58.5	minds. Fast forwarding to the Powell Press conference today,
	...

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