The people have spoken (at least those who voted), and 2023 and 2024 will be host to a divided government. The conventional wisdom is that a divided government is a good thing for markets. That’s not always, or even often, the case.
Category: Economic Analysis
Surprising no one, the Federal Open Market Committee (FOMC) voted to hike its policy rate by 75 basis points (bps; 100 bps equal 1.00%) to a range of 3.75% to 4.00%.
September’s Consumer Price Index (CPI) from the Bureau of Labor Statistics said inflation was 8.2% year over year, hotter than many expected. This inflation report solidifies our expectation that the Federal Reserve (Fed) will likely hike the federal funds rate by 75 basis points (bps; 100 bps = 1.00%) in November and by another 75 bps in December.
The Federal Open Market Committee just hiked its federal funds rate target another 75 basis points (bps; 100 bps equal 1.00%), to a range between 3.00% and 3.25%. Hiking rates aggressively is risky when housing is already struggling and when what the Federal Reserve (Fed) does today might not be fully felt for dozens of months into the future.
The old saying is that “talk is cheap.” It certainly isn’t if you’re a central banker. Investors hang on a central banker’s every word. Whether the Federal Reserve (Fed) hikes by 75 basis points (bps; 100 bps equal 1.00%) or 50 bps is probably less relevant than what Fed officials say with their Summary of Economic Projections (their guesses about what they’ll do in the future and how the economy may evolve).
Federal Reserve (Fed) Chair Jerome Powell gave a short and sweet speech at the Jackson Hole Economic Symposium on August 25, but the market took it as being brief and bitter. Since then, the Institute for Supply Management released its manufacturing and services indexes. Manufacturing activity has moderated, and services activity has been shockingly strong.
At his July 22, 2022, press conference, Federal Reserve (Fed) Chair Powell said that over the coming months, the Fed “will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2%.” Is there clear, convincing, or compelling evidence that inflation is headed that way? Not yet. The outlook is still as clear as mud. Let’s look at a few factors that inform our outlook on inflation.
The Federal Open Market Committee (FOMC) hiked its federal funds rate target by 0.75% at its July meeting, as expected.
When Federal Reserve (Fed) Chair Jerome Powell took the helm of the Fed in 2018, the Fed was close to the end of its rate-hiking cycle that started in December 2015. At the time, he said the Fed would be gradual with hikes. Fast-forward to January 2022, and Chair Powell dropped “gradual” in favor of being “nimble.” Then in the spring of 2022, he said the Fed would move “expeditiously” to bring down inflation.
Brian Jacobsen provides perspective on key events and topics for the week of June 25–July 1, 2022, and his thoughts about what the week ahead may hold. Plus: There’s a recap of the second quarter’s key events.
