In the case of Bitcoin, the virtual currency ledger, it was not significantly affected by external factors a few years ago. Many people say that they could make a profit just by doing well in the technical analysis (TA) of Bitcoin’s own chart.
However, these days, the reality is that not only NASDAQ but also Bitcoin are fluctuating in the tweet lines of super-large influencers such as the U.S. Federal Reserve policy, the Russian-Ukraine war, and Elon Musk. This has made it important for stock market and cryptocurrency investors to pay attention to related news and respond quickly.
In particular, among them, there is no choice but to pay more attention to the every move of U.S. Federal Reserve Chairman Jerome Powell. It is no exaggeration to say that all investors around the world are paying attention to Fed Chairman Jerome Powell’s “mouth.”
The FOMC, which was held on May 5th, Korea time, announced a 0.5% increase in the benchmark interest rate (Big Step), the largest increase in 22 years since 2000. This also led to a $3,500 plunge in bitcoin prices in one day. 바이비트 금지 As such, depending on what Fed Chairman Jerome Powell says, the global stock market becomes a “festival” or a “black Sunday.” We’re going to talk about Jerome Powell, the US Federal Reserve, and the FOMC.
Who is Jerome Powell?
Yes, Jerome Hayden Powell is the 16th chairman of the United States Federal Reserve.
To understand why Jerome Powell’s “mouth” is so important, let’s take a quick look at what the US Fed is and what the FOMC is.
What is the Federal Reserve?
The Federal Reserve System is the central bank of the United States. You can think of it as the same as the Bank of Korea. It is run by the seven-member Federal Reserve Board, appointed by the President and approved by the Senate, and guarantees thorough independence from the government. It is a famous anecdote that he ran into Fed Chairman Jerome Powell throughout his term as President Trump. As such, the U.S. president has the authority to dismiss the Fed chairman, but it is virtually difficult to interfere because he is completely independent in his duties.
Source = Wikipedia
The most important function of the Federal Reserve is to issue U.S. dollars, and in addition, it determines changes in reserve requirements, credit controls on stock trading, credit controls on stock trading, and Federal Reserve re-discount rates.
As the U.S. dollar is the world’s key currency, the Fed’s decision will affect the U.S. and the global economy as a whole. What’s unusual is that the U.S. Federal Reserve Bank is easily misunderstood as a national bank, but it is actually a private bank and private banks such as JP Morgan own 100% of the shares. The federal government says it doesn’t own any shares. For this reason, the Fed cannot help but consider the interests of US private companies. That’s why the government’s macroeconomic policy and sometimes its stance are bound to be different.
Meanwhile, even though the US Federal Reserve has the right to issue dollars, it’s a private bank, not a state-owned bank, so now the US government is raising money by borrowing dollars from the Fed.
What is FOMC?
Meanwhile, the FOMC, familiar to any cryptocurrency investor, is the Federal Open Market Committee. The committee consists of 12 members, seven from the Federal Reserve and five from regional Federal Reserve Bank representatives. The Federal Open Market Committee oversees open market activities and serves as an important tool for national monetary policy.
In short, what the FOMC does is it controls the amount of money that goes around on American soil.
The Federal Open Committee’s way of working is simple. You control the amount of money that goes around the market by buying and selling bonds in the financial market.
For example, let’s say that the federal funds rate right now is 5% and considering the economic situation in the United States, the most appropriate federal funds rate is 1%.
At this time, the FOMC eagerly buys bonds in the financial market. So if you buy bonds from the Federal Open Market Committee, that’s how much money is released on the market, and as a result, it’s easier to get money, so the federal funds rate falls from 5% to 1%.
Of course, that doesn’t mean that the FOMC comes forward and controls the amount of money that goes around the market. I just make a decision making. Then the Federal Reserve Bank of New York, the head of action, comes forward and buys and sells bonds as your big brother tells you to, and controls the amount of money that goes around the market.
The decision-making of the FOMC is made by a total of 12 votes. The Fed has the most votes in Chapter 12. Each of the seven directors has one, a total of seven. The remaining five chapters will be voted by 12 Federal Reserve governors scattered throughout the United States.
The FOMC’s meeting schedule is about eight times a year, approximately every six weeks. And through meetings, we decide what percentage of the federal funds rate would be appropriate and how much money would be released on the market. However, the meeting cycle is not fixed exactly eight times a year. Depending on the economic situation, it might increase to 9, 10, not 8
Now that we’ve got a rough idea of the Federal Reserve and the FOMC, we’re going to talk about Jerome Powell, the chairman of the Fed.
Jerome Hayden Powell is an American politician and financier who has served as chairman of the Federal Reserve since February 5, 2018.
Princeton University Political Science – After majoring in law at Georgetown University, he worked for Dillon, Read & Co., a small investment bank on Wall Street, and served as U.S. Deputy Treasury Secretary under the George Bush administration.
He then moved to Carlisle Group, where he was appointed Fed director by the Barack Obama administration in 2011. Since then, U.S. President Donald Trump has dismissed Janet Yellen, chairman of the Federal Reserve, to end her term as a single chairman, and named Jerome Powell as his successor. Since then, he has been serving as chairman of the U.S. Federal Reserve since February 1, 2018, with the consent of the U.S. Senate.
If Janet Yellen is a dovish, then Jerome Powell is called an “night owl.” It is a tendency to be classified as a moderate, not a hawk or a dove.
The confrontation between Trump and Powell during Trump’s presidency is famous.
In 2018, there was a slowdown in the world economy, including the United States. The U.S.-China trade war started by Trump was a big reason. At that time, the Korean KOSPI also suddenly plunged from 2000 to the late 1800s. After the Lehman crisis, quantitative easing, which had supported the U.S. economy, slowly ended with the Fed’s interest rate hike and asset reduction, and fatigue was emerging due to the U.S.-China fight.
At that time, the U.S. stock market could not avoid its impact. Nasdaq blue-chip stocks, which had continued to rise, suddenly slowed down and noise began to be heard in the U.S. securities market, which had been partying for a long time. From U.S. presidents to private investors, opinions have begun to prevail to revitalize the economy by cutting interest rates.
U.S. Federal Reserve Chairman Powell will pour cold water later.
“Don’t overreact to temporary indicators and watch them calmly.”
On December 21, 2018, when Fed Chairman Jerome Powell decided to raise interest rates, President Trump found a way to fire Powell, who he appointed but did not listen to. However, the actual dismissal was not made because aides stopped President Trump, saying the Fed’s dismissal could destabilize the stock market.
In a speech at Jackson Hole on August 23, 2019, Powell said, “The U.S. economy is currently at the level the Fed is aiming for, and the Fed will work for economic expansion,” and President Trump criticized bitterly on Twitter two hours later, saying, “Who is our bigger enemy, Xi Jinping or Powell?”
In fact, whenever Powell announced the Fed’s stance, NASDAQ stock prices rose well and then fell suddenly.
Meanwhile, Powell’s previous speeches and economic policy stances are as follows.
February 2018 – Jerome Powell as Fed’s new chairman
This is a time when Powell’s decision-making was carried out as expected by the market and as many people wished. The U.S. stock market was also cruising.
2. March 2018 – We will raise interest rates four times!
This is the time when Powell’s chair as the Footman began. He hinted at a rate hike ahead of the regular FOMC in March 2018. “I feel confident that a gradual increase in the benchmark interest rate is the best way to achieve my goal,” Powell told the House Financial Services Committee.
At that time, it was a solid economic situation, so Powell’s remarks that he would raise interest rates, which had been too low, could be fully expected. Anyway, interest rate hikes have always been unwelcome news for the stock market.