The Main Factor That The Fed Will Not Raise Interest Rates Substantially

Valier Greg Valliere, the chief political strategist of the Potomac Research, believes that interest rate forecasts have been one of the frequent mistakes of Wall Street financiers. He believes that these people will again predict mistakes.

Valier wrote in a report released on Tuesday (December 30th), "those smart financial people once again said that the Fed will raise interest rates next year. They have been saying so for the past few years that I still do not believe them."

Here are 5 reasons why he believes the Federal Reserve will continue to maintain low interest rates.

1. a new round of crisis in Europe will prompt investors to flock to safer US Treasury bonds. Greece, for example, seems increasingly worrisome. On Monday, the Greek parliament failed to elect a new president, which means that anti - tightening parties may gain the upper hand and increase the possibility of Greek debt restructuring.

2. Russia's debt crisis is also a major reason for investing in US Treasury bonds. Further decline in oil prices has allowed Russia to default.

3.. Federal Reserve It is the most dovish session we have seen in our lifetime. They do not want to raise interest rates, and even if they finally start raising interest rates, the pace will be slow and gradual. Federal Reserve Chairman Yellen and her colleagues have stressed that the labor market is still weak and global economic growth is slowing down.

4. lower Energy price The core inflation will be lowered and deflation will continue.

5., the US federal budget deficit has continued to decline, this year will easily fall below 2.5% of GDP, while the fiscal deficit ended in September 30th will be 2.8%. Although the market demand for treasury bonds remains strong, the federal government will reduce its issuance of treasury bonds.

So in general, U.S.A There is no doubt that the economy is gaining momentum. Low interest rates are like fuel for the engine. Based on the above 5 reasons, we believe that the Fed will not raise interest rates in 2015.

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The provisions of the people's Bank of China on the deposit of interbank deposits into general deposits are strictly related to changes in the statistical caliber, and are more precise statistics on the definition of deposits and currencies. Many "experts" in the stock market interpreted as releasing 5 trillion and 500 billion loans, the Chinese version of quantitative easing and so on. It's a big misreading.

Taking account of interbank deposits into general deposits can really increase the denominator of loan to deposit ratio and reduce the ratio of deposit to loan. However, it is impossible to conclude that the loan ratio will be reduced. Because if the statistics of loans are correspondingly changed, if the scope of general loans is expanded, then denominator and molecules will also expand. When the people's Bank of China and the Banking Regulatory Commission have not further clarified how to refine the calculation of the statistics and caliber of the deposit and loan ratio index, it is a misreading to assert that it will reduce the deposit loan ratio index.

Reducing the ratio of deposit to loan ratio is not the same as expanding loan scale. The total scale of social loans is the people's Bank's macroeconomic regulation and control according to the speed of economic development, the capital status of commercial banks and the need to control price targets. Whether the scale can be expanded is not related to the ratio of deposit to loan ratio. It depends on price and economic development.

The ratio of deposit to loan ratio is stipulated in the commercial bank law of our country, and the safety index that commercial banks must abide by is regulated by the CBRC. Whether commercial banks can expand the scale of loans, of course, does not exceed the index of deposit and loan. However, the specific size of loans depends on the scale of loans of capital and consent. It is also possible to make appropriate adjustments within and out of the table to bypass the index of deposit to loan ratio.

Comparing the deposits of the same industry into general deposits to enlarge the money supply, the Chinese version of QE (quantitative easing) is even more difficult. The expansion of money supply is the process by which the people's Bank provides basic money to society through refinancing, foreign exchange and open market operations, and leads to deposits and cash expansion through various loans and businesses of commercial banks. The No. 387 document issued by the people's Bank of China only involves the statistical caliber of different deposits, which is not related to the expansion of the money supply.

Of course, we do not deny that the No. 387 document of PBC is a neutral theme for commercial banks. Commercial banks in the business activities due to the high deposit reserve ratio (China's inflation pressure), but also by the loan to loan ratio index season assessment constraints, often at the end of the season for the completion of indicators to find deposits everywhere. If the statistics are changed, commercial banks can slow down the pressure of deposits at the end of the season so that liquidity will not be artificially tight at the end of each quarter, and the money supply statistics will be more accurate. However, it is a big misleading market to exaggerate such profits into major monetary policy measures, major changes, China's version QE and the release of 5 trillion loans.

For the recent stock market rally, I have a strong feeling that the bull market is at the end of the strong market. The stock market has basically gone round from brokerages, banks, middle prefix, steel and real estate. How much more space is there? Compared with the price of Hongkong H-shares, most of them have exceeded the price of H shares. Rational investors should consider retreat strategically. Of course, the stock market and the stock market will always be there. There are also stocks and plates in the bear market.