How Much Will The Fed Rate Hike Affect Cotton Prices?

How much will the Fed rate hike affect cotton prices?

In the early morning of March 17, the Federal Reserve announced that it would raise its benchmark interest rate by 25 basis points to a range of 0.25-0.50 percent , the first rate hike since December 2018. The dot plot of Fed officials' expected future interest rate levels released after the meeting showed that some Fed policymakers expect the Fed to raise interest rates six times in total after this year.

Federal Reserve Chairman Powell said on Wednesday afternoon that although raising interest rates means an increase in borrowing costs, the U.S. economy can still maintain strong growth. top, and then began to subside in the second half of the year.

I originally thought that the market was going to be full of storms, but today the trend of commodities is basically stable. First, the Fed raised interest rates by 25 basis points, which was basically the same as the market expected. If the rate hike is higher than expected, the commodity trend today may be completely different. a situation. Second, since last year, the market has been rumoured to raise interest rates, and the market has already digested some expectations. When the interest rate hike is actually announced, the market appears calm. Of course, the Fed raising interest rates will definitely have a negative effect on commodities, but this negative effect will not be poured down all at once, because raising interest rates is also a long-term process. The current inflation is like a high-speed car. If it brakes suddenly, there will be an accident. It can only slow down and stop. The market will definitely have a back and forth here. When the Fed raises interest rates again, it will definitely always pay attention to the market reaction and make decisions cautiously, otherwise it will cause liquidity crunch and drag down economic development.

Returning to the trend of cotton, cotton was originally on the rise yesterday. After the Fed announced interest rate hikes in the early morning, cotton rose slightly and fell back. It was not affected by the interest rate hike in the short term. . At present, the trend of cotton is still related to the fundamentals. Although the cotton price is extremely high now, the time for a sharp decline has not come, and the spot price is still strong. The current cotton market is over, and it is in the stage of destocking. The current destocking speed is lower than expected, mainly because the downstream demand is not good. Whether the cotton price can hit the previous high depends on the later consumption and planting conditions. With the passage of time, in the long run, the downward pressure on Khmer prices will gradually increase, and there are still some uncertainties in the short and medium term.