It has been nearly a month and a half since the last interest rate decision by the Federal Reserve. When the interest rate decision was made in April, the minutes of the Fed meeting showed that "many" Fed policymakers believed that if the economy continued to grow rapidly, "some Time" to start talking about tapering bond purchases is appropriate. Since it was the first time that the Federal Reserve stated that it could discuss the scale of debt reduction, U.S. stocks fell in response, and the U.S. dollar and U.S. bond yields rebounded. However, the economic data and environment faced by the Federal Reserve during the interest rate decision in April are different from the current one. In the past one and a half months, the United States released two non-farm payroll reports that surprised the market, and the recovery of the labor market was weaker than market expectations. The two US consumer confidence indexes released in the past two times were also worse than market expectations, reflecting that the pace of economic recovery has begun to slow down. However, the United States also released inflation data that exceeded expectations for two consecutive months. CPI inflation in May reached 5%, the highest point since July 2008. In the face of different data and economic performance, how will the Fed’s interest rate decision in June change? How will it affect the US dollar and US stocks? Focus 1: Will policy be adjusted due to rising inflation? Keep interest rates unchanged at 0%-0.25%, and the $120 billion monthly asset purchase program will also remain unchanged. Therefore, the content of the interest rate decision will not be the focus of the market, and the market will focus on how the Fed will respond to inflation data of up to 5%. The market has long hoped that soaring inflation and prices may force the Federal Reserve to tighten policy earlier, which has led to a sharp rise in the yield of the 10-year U.S. Treasury bond since February this year. However, when the CPI inflation in May exceeded expectations and reached 5% last time, the market's expectations for inflation to drive the Fed to reduce quantitative easing have significantly weakened. U.S. bond yields have now fallen below 1.5%, reflecting that the market no longer expects the Fed to change its current easing policy in response to inflation. However, since the Fed mentioned in April that it may start discussing tapering its bond purchases in the future, the market is expected to pay attention to when the Fed will start discussions, or under what conditions they can start discussions, especially when inflation has reached 5%. However, based on the mediocre performance of recent non-agricultural data and economic data showing that the pace of economic recovery has begun to slow down, it is expected that the Fed will continue to downplay inflation risks and tolerate inflation that is higher than the target for a period of time, and will continue to focus on the pace of recovery in the labor market , in order to alleviate the market's expectations of the Fed's early tightening and easing. If so, it will be more favorable to US stocks and negative to the dollar. Focus 2: The Federal Reserve’s demand for overnight reverse repurchase reached new highs Over the past month, another market focus has been that the Fed’s overnight reverse repurchase demand has continued to hit new highs. Although the use of the Fed’s reverse repurchase fell the most in two months last night, the Fed’s reverse repurchase demand still reached a record high of US$583.9 billion in a single day on Monday. The continuous record high usage reflects the serious excess of US dollar cash in the banking industry, resulting in a large amount of excess cash being used in the Fed’s reverse repurchase operations. It also reflects that the Fed’s quantitative easing and bond purchase operations have flooded the market with a large amount of US dollar cash. Demand has not kept up with that supply. The market will pay attention to what the Fed thinks about the continuous record high demand for the Fed's overnight reverse repurchase. Since the current reverse repurchase operation interest rate is maintained at a level close to 0%, it has also continued to depress short-term interest rates. And adjust the policy. If the Fed does not respond much to the rise in demand for reverse repos or does not consider it a risk, I believe it will not adjust its easing policy accordingly. Since the inflation rate in the United States rose significantly in April and May, with the CPI inflation rate reaching 5% in May and the PCE inflation rate reaching 3% in April, it is expected that the Federal Reserve will inevitably raise its inflation forecast for 2021. However, the market will focus on how the Fed predicts inflation rates in 2022 and beyond to reflect whether the Fed continues to believe that inflation will only rise in the short term rather than in the long run. This will reflect that the Fed will continue to tolerate short-term rises in inflation and maintain the loose policy unchanged. Focus 4: Will more officials support an early rate hike in the dot plot? The dot plot in March showed that the Fed will keep interest rates unchanged until the end of 2023. Currently, only 7 officials support raising interest rates before the end of 2023, while some Eleven officials backed leaving rates unchanged. As inflation rises and the U.S. economic recovery is in good shape, the market will look for whether more officials will support an early rate hike, or even reverse the situation. It is expected that the rate hike cycle will start before the end of 2023. If so, it will put greater pressure on the market, and the dollar may therefore With a clear rebound, US stocks will go down due to worries about tightening liquidity.