Federal Reserve Raises Rates 25bps as Expected, Disinflationary Process has Started

The Federal Reserve raised rates by 25 bp to a target range of 4.50-4.75% in unanimous vote at their February meeting as expected. Market Fed futures pricing suggested a 96% chance of a 25 bps hike. The markets focused on “ongoing increases in the target range will be appropriate.” Fed says “Inflation has eased somewhat but remains elevated.” in a change from “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price … Continue reading “Federal Reserve Raises Rates 25bps as Expected, Disinflationary Process has Started”

Federal Reserve Beige Book Highlights Housing Markets Continued to Weaken

The Federal Reserve released its Biege Book Wednesday prepared at the Federal Reserve Bank of Cleveland based on information collected on or before January 9, 2023.  The report was consistent with what we have seeing with economic data released, not a lot has changed over the past month, the economy is weakening. It was reported housing markets continued to weaken, clearly higher interest rates have further dented home sales and household finances. Notably many retailers noted increased difficulty in passing … Continue reading “Federal Reserve Beige Book Highlights Housing Markets Continued to Weaken”

Federal Reserve Raises Rates 50bps as Expected, Hawkish Revisions to Unemployment and Inflation

The Federal Reserve raised rates by 50 bp to a target range of 4.25-4.50% at their December meeting. The markets focused on the changes in the dot plot showing Fed funds finishing 2023 above 5% and hawkish revisions to the unemployment, GDP and inflation forecasts. A higher-for-longer scenario that continues in 2024 and 2025 dots. Stock markets sold off on the changes. Most officials project an unemployment rate rising to 4.6% or higher by end of 2023 and stays above … Continue reading “Federal Reserve Raises Rates 50bps as Expected, Hawkish Revisions to Unemployment and Inflation”

Federal Reserve Beige Book Highlights Higher Interest Rates Further Dented Home Sales

The Federal Reserve released its Biege Book Wednesday prepared at the Federal Reserve Bank of Boston based on information collected on or before November 23rd, 2022.  The report was consistent with what we have seeing with economic data released. It was reported higher interest rates further dented home sales, which declined at a moderate pace overall but fell steeply in some Districts. Inflation was expected to hold steady or moderate further moving forward. Yesterday the CoreLogic Case-Shiller 20-city home price … Continue reading “Federal Reserve Beige Book Highlights Higher Interest Rates Further Dented Home Sales”

NY Fed Williams Expects US Jobless Rate to Rise from 3.7% to 4.5-5.0%

The New York Fed president John Williams, who is a voting member of the FOMC was speaking at a virtual speech to the Economics Club of New York continued with a hawkish tilt on inflation saying, “There is still more work to do,” he is less the hawk with jobs. On inflation he expects it to cool to 5.0-5.5% by year end and 3.0-3.5% by late 2023, which is comparable to the range of 2.6-3.5% in the Fed’s SEP. Williams ahead of Fridays … Continue reading “NY Fed Williams Expects US Jobless Rate to Rise from 3.7% to 4.5-5.0%”

Markets Reverse Sharply on Feds Powell Statements, What Does it all Mean?

Thirty minutes in financial markets is a long time. Markets were relieved after the Federal Reserve again raised rates by 75 bp at their November meeting. Then Chairman Powell started talking and it all collapsed. The Nasdaq went from +25.45 at 10856.15 to negative to close -366.05 points at -3.36% at 10464.65. The 10-yr note yield fell to 3.98% but jumped to 4.11% after the close of the cash session. Traders had reacted initially to the tone of possible rate hikes slowing … Continue reading “Markets Reverse Sharply on Feds Powell Statements, What Does it all Mean?”

Federal Reserve Again Raises Rates 75bps as Expected, Hints at Possibly Smaller Hikes

The Federal Reserve again raised rates by 75 bp to a target range of 3.75% to 4.0% at their November meeting. The market was pricing in 98.0% for 75 bps and 2.0% for 50 bps. It was a unanimous vote. Markets reacted to the tone of possible rate hikes slowing by selling the US dollar and buying equities indices after the release. In determining the pace of future increases is the key dovish line. The Fed said they are prepared … Continue reading “Federal Reserve Again Raises Rates 75bps as Expected, Hints at Possibly Smaller Hikes”

Federal Reserve Beige Book Highlights Employment Strength as Price Increases Generally Moderate

The Federal Reserve released its Biege Book Wednesday prepared at the Federal Reserve Bank of Dallas based on information collected on or before October 7, 2022. The report showed a mixed outlook, inflation still strong but moderating with wages and job growth moderating but solid. Members noted rising mortgage rates and elevated house prices further weakened single-family starts and sales, but helped buoy apartment leasing and rents, which generally remained high. We saw US housing starts declined 8.1% month-over-month in … Continue reading “Federal Reserve Beige Book Highlights Employment Strength as Price Increases Generally Moderate”

Hawkish Federal Reserve Again Raises Rates 75bps as Expected, March 23 Terminal Rate Higher

The Federal Reserve again raised rates by 75 bp at their September meeting. The market was pricing in 84.0% for 75 bps and 16.0% for 100 bps. It was a unanimous vote. Markets reacted to the dot plot, which shows higher terminal rates and the Fed holding higher for longer. Money market pricing largely unchanged for rest of 2022, with 75bps in Nov priced at 80% probability 50bps then priced for Dec. Hawkish 4.6% 2023 Fed dot has seen terminal … Continue reading “Hawkish Federal Reserve Again Raises Rates 75bps as Expected, March 23 Terminal Rate Higher”

Fed’s Powell Reiterated his Commitment to Inflation at Jackson Hole in Cato Speech

Federal Reserve System Chairman Jerome Powell on Thursday speaking at the Cato Institute reiterated his commitment to inflation as expressed at the Jackson Hole symposium. His speech came after ECB had just raised rates by 75bps, earlier in the week the RBA with 50bps and Bank of Canada also raised by 75bps. Powell took a decidedly hawkish tone at Jackson Hole which sent US stock markets sharply lower. The chairman sent stock futures lower when he reminded his to intention … Continue reading “Fed’s Powell Reiterated his Commitment to Inflation at Jackson Hole in Cato Speech”