The surprise FOMC is over. The sharp turn to the

The surprise FOMC is over. The sharp turn to the dove-- it's almost like the sharp turn that Waller made last month-- and the sharp turn that the ECB's Schnabel made, so that we can see some level of change at the ECB's meeting. And as I'll tell you later, it reminds me of the 19th year of the year. And the market was very excited by the dovish FOMC, and it gave us the confidence that the Fed was coming to us when we told them what we've been waiting for. And the asset market reacted very strongly. And the stock market was even hotter, and interest rates dropped significantly, and the dollar weakened. Let's start by focusing on the points that we talked about the other day.

First, look at the dot plot that drew attention. It's a big change. First, the Fed members agreed to stop raising the benchmark interest rate further. The hawks who said we should raise it to 6% next year have disappeared. Next year's forecast is 4.5-4.75% level. The main focus is on expecting three cuts within the year. The 25-year outlook has also changed significantly. In September, the number of commissioners who expected to stay above 4% was eight, but this time it's down to three. It's similar in 26 years. There were five commissioners who expected it to exceed 4% by the end of 26 years, but it's down to one this time. The concept of Higher for Longer, the level itself, feels like it's come down significantly. There's also a change in the long-term interest rate outlook, which stands for neutral interest rates. Basically, it was dovish compared to September. It's a case of pushing back concerns that the neutral interest rate might rise as growth itself strengthens. It's been a dot plot of Anyway pigeons.

If you look at the growth and inflation projections, the growth projections are generally upwardly revised. We're looking at 2.6% this year. We're looking at a slight drop next year, but we're looking at a slight increase after that, and we're looking at a good overall growth. We're looking at prices coming down. Next year, the year after that... It's lower than we expected in September, but we're repeating our previous argument that if we're going to go down to the Fed's target of 2.0%, we're going to be able to cut interest rates if we're sure that we're on the path to 2% even if prices aren't going back to 2%. Powell's remarks at a press conference give a boost to the market's belief that even if prices hit 2.5% next year, we could have a rate cut. And that, combined with Powell's remarks, we have a pretty picture.

Next is the financial situation, which is a key keyword of the FOMC in November. The financial situation is tight, so the Fed doesn't have to make any further increases. If you reverse this, if the financial market situation is relaxed, shouldn't the Fed think about further increases again? Nick Timiraos of the Wall Street Journal asks you this question, and Powell's comments are a little embarrassing. Powell said, "That's what the financial markets are thinking. Our Fed is doing what we judge. The Fed is right. It's not what it's doing. It's not what the Fed is doing. It's what it's saying. So I don't mind much. So it kind of contradicts what we said in November. When the market makes its own tightening moves in anticipation of further tightening, it's considering it. Now it's saying that you don't care if you run out first in anticipation of easing. What should I say? It seems inconsistent. It's a very good thing for the market. The price of assets is jumping so fast that I noticed that the Fed doesn't care too much.. It's Bravo itself.

And at the end of the press conference, the question of shrinking the balance sheet came up. This was Varance. It was a question of whether we were thinking about ending quantitative tightening or contracting. Powell seemed to be pondering for a moment. First of all, the reverse repo has been shrinking rapidly in recent years. On the other side, banks' reserves are increasing significantly. The answer was, "Is there really no need to end quantitative tightening early when banks still have $3.5 trillion in reserves?" And the follow-up question was, by the time we cut interest rates, are we going to adjust quantitative tightening? And the answer is that it depends on why we're going to cut interest rates. Honestly, it kind of had an ad-lib, but if you're going to have to cut interest rates quickly because of the recession and so on, of course, you're going to end it, but you're not going to have to do that. If you're going to cut interest rates to slightly support a slowing economy (the so-called insurance rate cut), you're not going to have to do that.

Eventually, the market gave all the stories it wanted to hear, and a strong reaction came out. Particularly noteworthy is the small and medium-sized stocks like the Russell 2000. Small and medium-sized stocks are the hardest hit by the Higher for Longer. As I mentioned earlier, I breathed a sigh of relief that the level of pain would be somewhat lowered. Rather than the current interest rate level, sectors that felt more burdened by the Higher for Longer in the mid- to long-term… for example, emerging economies, small and medium-sized stocks… I think these will show a sigh of relief.

I'll tell you one more thing, it's similar to the one in the 19th. If the Fed follows the direction that the market wants, the market will not only be very satisfied, but it will go one step further and demand more. If you look at the fairy tale of the sun and moon, you'll see a tiger. They say if you give them a piece of rice cake, they won't eat it. If you give them a piece of rice cake, they say they're different. They say they'll eat my grandmother later, and then they'll eat my sister-in-law at the end. I'm looking at the Fed, which is going to cut interest rates three times next year, and I'm looking at six cuts, and I'm looking forward to six cuts in interest rates, and I think the government bond market will also react to the level of interest rate cuts, but the 10-year Treasury bond rate has been pushed down to the upper end of the six cuts, at 4.0%. Next year's growth is at 1.8%, next year's prices are at 2.3%, and the bad interest rate has come down to the 4% level.

Weakness of the dollar and falling interest rates, together with soaring asset prices, can create a more relaxed environment. Keep in mind that if hidden liquidity is released, we can bring up the inflation issue again. Shorten the essay today. Thank you.