Tapering Toward a Pause

For some Federal Open Market Committee (FOMC) meetings, the result seems obvious ahead of time to just about everyone. This was one of them. When the result is obvious, the market shouldn’t react much because there’s little room for a surprise to push prices around. But this time, the market did react. Why? It’s simple: The FOMC is splintering into factions, and that makes the outcomes from future meetings much less obvious.

Inflation and Diversification: From Wreckage to Rebound?

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 Fed: Boring Is Great

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.

Fed Preview: Talk Isn’t Cheap

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).

The Fed and the markets—a game of chicken.

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.