FOMC, 11/2/22

yogibearbull

Notes from above & Fed Chair Powell’s Press Conference

Fed fund rate hike by +75 bps to 3.75-4.00%. Bank reserves interest rate 3.9%. Primary credit rate 4%. More hikes are coming until the Fed sees slowdown in economic activity from the financial conditions tightening (but there is no numerical targe for a terminal rate). Inflation-expectations have stopped going up. The Fed watches core PCE and 3mo-18mo yield spread (media watches a variety of yield spreads). Over-tightening is preferable to under-tightening (or a premature pause); reason is that it is easier to fix over-tightening.

QT continues at -$95 billion/mo (-$60 billion/mo for Treasuries, -35 billion/mo for MBS).

Labor and job markets, and wage growth remain very strong. Consumer spending is robust. Housing is regional but isn't hot anymore.

The Fed is aware of global concerns and regularly consults with other central bankers. But the Fed focus is on the US.

US soft-landing is still possible but is becoming less likely due to persistence of inflation.

Impacts of fiscal spending are mixed.

Ethics issues at the Fed are being addressed with stronger disclosure rules and other restrictions.

I had a dentist appointment, so this is a delayed report.

https://ybbpersonalfinance.proboards.com/thread/158/fomc-statements-6-7-weeks?page=2&scrollTo=823

Crash

Thanks a ton, yogi. Everything went south afterwards, didn't it? I can point to ONE stock which actually rose today: PSTL. (Postal REIT.)

yogibearbull

Well, there was no language or promise of Fed Pivot. The FOMC Statement seems more 2-sided, but Powell in his presser was tough and 1-sided.

JD_co

Powell - "...we think we have a ways to go. We have some ground to cover with interest rates before we get to that level of interest rates we think are sufficiently restrictive."

Sven

He is implying that he is unsure which direction to go. These guys seem to speak in codes.

yogibearbull

Yesterday, CME FedWatch wasn’t updated fully. Today, it is showing hikes of 50-50-25-25 (and moving around that) to the fed fund terminal rate of 5.25-5.50%. This is BAD news for both stocks and bonds (as if things weren’t bad already. Good seasonality (November 1-April 30) is a weak effect and may not help.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

sfnative

That sounds like "the revenge of the savers," the people who were sacrificed to artificially low interest rates for over a decade.

AndyJ

yogibearbull said:

Yesterday, CME FedWatch wasn’t updated fully. Today, it is showing hikes of 50-50-25-25 (and moving around that) to the fed fund terminal rate of 5.25-5.50%. ....

This is a good reminder to the 'Treasury & CD' crew (me included) to keep planning for higher yields to come in allocating $.

Sven

The CME report is very informative on the terminal rate of 5.25 - 5.50% !

Yields are getting quite attractive, yields near 4.5+% now. Potentially it will get over 5%+ and would make them competitive to stocks and bonds in coming years.