The Fed is not thinking about interest rate cuts. But what about hikes?
Wolf Richter at Wolf Street has a different interpretation of the Fed’s Press Conference than I do. The difference isn’t radical, but I would not call today’s meeting or press conference particularly hawkish.
Wolf Street: Another Hawkish Hold
That’s a nice chart by Wolf. So, how much longer?
Please consider Another “Hawkish Hold” with Tightening Bias: Fed Keeps Rates at 5.50% Top of Range, Rate Hike Still on the Table. QT Continues
Higher for how much longer?
The end of the rate hikes is typically followed by plateaus before rate cuts begin. The end of the rate hikes may not be here yet, and the Fed has already said a gazillion times for months that the plateau is going to be “higher for longer.”
Today’s statement repeated the language of the prior statements, which leaves the door open for more rate hikes:
“In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
When will the rate cuts start? The Fed will release its next SEP and “dot plot” at the December meeting. In the SEP released in December 2022, the Fed shocked the world because it removed the projections of a rate cut in 2023. In the SEP released in September, the Fed moved the rate cuts further out into the second half of 2024, which was another shocker. So the next SEP in December will be interesting.
On Hold for Longer
The last meeting was hawkish. This was just more of the same.
Powell did say “The Fed is not thinking about rate cuts at all.” That was the most hawkish thing from the press conference. Otherwise, it was just a rehash of things that should have been totally expected.
Reporters kept trying to get the Fed to commit to more hikes or more cuts with a barrage of similar questions, but Powell ducked them with variations along the lines of significant tightening has taken place and we will wait and see.
Hold Bias, Not a Tightening Bias
I watched the entire press conference and do not see a tightening bias.
I see a stated hold bias.
Unstated Bias
Stock Market Interpretation
After floundering around feebly, the stock market seems to have gotten the message “no more hikes”
ISM Manufacturing Plunges to 46.7 Percent. New Orders, Backlogs in Contraction
For discussion of today’s ISM report please see ISM Manufacturing Plunges to 46.7 Percent. New Orders, Backlogs in Contraction
Notably, the ISM reported “eighty-nine percent of panelists’ companies reported ‘same’ or ‘lower’ prices in October.”
As Powell stressed, this will be data dependent. However, today’s ISM report provides a possible clue that things are not as good a perceived.
We have a jobs report on Friday and there will another one before the next meeting.
I think hikes are done.
So the Fed will lower FFR in 2024 in time to manipulate the elections. Just as Janet Yellen lowered long-term Treasury rates in January 2016. Even though Hillary lost to Trump in 2016, congress retained the incumbent majority. The Fed had announced the end of QE in October 2014. By 4Q2015 Obama’s fiat addicted economy GDP fell to 0.5 percent. If Yellen didn’t influence the market, 1Q2016 GDP of 0.4 percent would have fallen negative for the remainder of the year. And voters would have ousted the spendthrift incumbent liberals in congress. No amount of Russian Facebook ads could rival the influence of a reduction in rates.
…gave you a like, yankee frog, because I agree with you for fc kn once , posted more or less the same comment underneath….we re getting fn old arn t we …
To get a better understanding of most of the first world nations, we should study the rules of MMT.
According to many MMT supporters, the Federal Interest rate should be at 0%, the natural rate. We should “do away with the increasing and lowering of interest rates as they’re ultimately not that relevant when it comes to growth and long-term business decisions.”
B.I. does a great job at explaining it here:
link to businessinsider.com
no doubt true. and pax amerika can easily rule the world, too. and israel is not our bitch pawn………all the men are good looking and all the women strong………..
If the FED has learned anything at all from its 2 decades long crazy policy it should at least be that healthy economic cycles should NOT be interrupted with insane rate cuts and that 4% should be a fc kn minimum to avoid asset bubbles in all aspects…. 7% would be even better !
It’s amazing something hasn’t broken already given the rise in interest rates and the corresponding QT. I suppose profligate spending by the Brandon Administration has buoyed the economy (or what remains of it). Brandon is hoping this can get him through the election cycle, before the whole farce collapses under its own weight. But, this may not be the case. Things may start falling apart right in the middle of the campaign season, causing him to put pressure on Powell to lower interest rates. But only time will tell. I’m just hoping the bozo in the White House doesn’t start WW3.
As I write this, the S&P is up 200 points (approximately 5%) in four trading days so far this week. It’s amazing how resilient the equities market is.
Besides slowing economic and consumer activity resulting from higher rates, I would have thought the availibility of decent risk free returns in CDs and treasuries would take some of the wind out of the stock market, but that doesn’t seem to be the case.
Up is down, dogs and cats living together, etc.
Mish, thanks. Wolf Street baby is all about the Fed, housing, consumption, car sales…exogenous causes and their symptoms are deleted.
1) War, more rates hike. War, always inflation.
2) War, pro Palestinian protests and chaos. If Biden isn’t a viable candidate, Michelle might take over, b/c Gamala is worse. There is nobody else.
3) It’s all about power. SPX in wave C down might test/breach Mar 2020 low.
1) A bullish option : NDX 1D, July 19 high is wave 3. NDX will rise to a new all high
after the current wave 4 down is over. NDX is backing up, before breaching Nov 2021 high. The Fed may hike.
2) A bearish option : SPX 1D, Aug 18 low is wave 1 down. Sept 1 is wave 2. Wave A
down might be over. After a counter wave up, SPX might drop further down in wave C, before a sling shot up to a new all time high.
3) More bearish : SPY 1D, Aug 18 low is 1, Sept 1 high is 2. The first zigzag was completed on Oct 30 low, wave C and [W]. Wave [X] up , a thud, before wave C down, which will complete the first wave down in wave 3 down.
I see no reason for the Fed to lower rates anytime soon and I see lots of reasons to see the Fed keep it at this level for a long time. Even at these levels, interest rates are historically low. Just look at a long-time Fed funds chart going back to the 1940’s. What we see as high is actually rather normal so I suggest you get used to it because I doubt that rates will fall soon.
It’s all relative. When fed funds fell to 5% in the early 90’s they were dirt cheap compared to prior years. Today’s five percent is extremely expensive compared to where they were just two years ago.
Markets took off in the 90’s as rates fell dramatically. Today’s market has not seen a new high in almost two years as rates have skyrocketed.
…gave you a like, yankee frog, because I agree with you for fc kn once , posted more or less the same comment underneath….we re getting fn old arn t we …
Per Wolf’s analysis, Fed Funds appears to be in the plateau/higher for longer stage. Actual interest rates told a much different story in the three prior plateaus on Wolf’s chart. The ten year fell during the these plateaus as the market sniffed out future rate cutting cycles.
Why would the market’s reaction be different any this time?
1) The TGA is 830B, a lower high, b/c Mike Johnson, Mr Speaker of the house,
might shut the gov down in mid Nov.
2) Pro Palestinian protests & sentiment are on the rise . It might dim Xmas sales. It’s a golden opportunity. If the pro Palestinian protest cont in 2024 and becomes more violent than the George Floyd riot, Biden might retire, or removed as a candidate, b/c
black, Muslims and BLM will not vote for Biden, since he supports Israel. Michelle is the brain. Obama runs the democrat party. Biden is squeezed between Obama & Trump. It may be ==> Michelle vs Trump. The same game worked three years ago.
3) If elected Michelle will rule this country for 12 years, serve ME entities to increase their influence and convert more people in this country to Islam.
4)
Michelle is the brain! 🤣 Come on man!
Wolf Richter has turned sanguine with Powell as chair, but Powell’s hands are tied with the legacy of the rein of the “professors”. Too much debt has been accumulated too make the system stable again. The ship is difficult to stabilize.
Difficult? Or impossible perhaps
“The ship is difficult to stabilize.”
Not sure I agree on that, the Titanic has been pretty stable since 1912.
The Fed doesn’t want to further raise interest rates as that lowers the Fed member banks holdings of treasury bonds values (bought when they were yielding an abysmal interest rate of less than 2%) even more. The Fed also refuses to increase the rate of QT which would somewhat offset the USG explosion of liquidity (through deficit spending).
Right now, for every $1 of liquidity the Fed removes, the USG adds $2 or more. Our wonderful elected representatives have supplanted the Fed as the most aggregious providers of liquidity to the system with all of it backed only by debt.
Fiscal prudence has gone extinct…
The DC clown show is only worried about feathering their own nest. The US population are just cows to be milked and then slaughtered.
except the tax cows on this farm get to vote. and they vote themselves. democracy works. amerikans are assholes. so they elect assholes. tough medicine for an old man north of 25 to handle, i have found……….
Money supply tight and rates higher. Consumers stop borrowing or be maxed out on credit cards. Government will have to issue new debt and renew at the highest levels in decades. Continue to press market and major economic slowdown. Dollar close to breaking out could mark a top. Rty would get hit the most. Dr. Lacy Hunt expects a hard landing. What about inflating it’s way out of a debt crisis?
But who would want real estate in the USA Certainly not me the way things are going
Productive farmland should always be in demand.
Bill Gates has invested in a LOT of farm land. I read recently that he also bought a million shares of Biontek in September 2019. Apparently, he was involved in Event 201 the following month, followed by a pandemic which made him a boat load of money on the stock.
i love the farmland trade. but the GOV can always nationalize it………..or locally grabbed. stuff happens
Yeh, but where do you move? It’s an ideological infestation that spread by the usual suspects throughout the “rule based order”.
Outside of it, it is worse. Look at the waves of migrant escaping the hellholes of their own making.
In the past, you could find a safe refuge, but where is it now?
You mention Dr. Hunt as evidence for your position.
No one loves Dr. Hunt more than I do, he is a great man, but his model of too much debt keeping long term bond yields relatively low has failed miserably.
Will it magically start working again? According to many of his past writings over the past 15 years, what happened last year and this year was next to impossible. Even in his commentary in Jan. 2022. ( Q4, 2021), he was bullish on long term Treasures, with NO hint of the debacle that was coming. He began to change his tune in April of 22, with long term yields beginning to skyrocket and said that bonds would be ok if the Fed did the right thing. Well, by Dr. Hunt’s own admission, the Fed DID subsequently do the right thing, and pretty quickly at that if one compares historically, but long term yields still went up another 66%(!) anyway (from 3 to 5, approximately). Other formerly great economists and commentators whose names I will not mention made similar mistakes. Obviously, like Dr. Hunt, their models were wrong. Now granted, this was the result of the destructive policies of the fascist scum now in power , not really a failing of Dr. Hunt or others. But we’re supposed to anticipate things like this and still come out on top. I did not anticipate it at this time. I was wrong and will not now try to make predictions and act as though I wasn’t wrong. And that I know what I’m talking about. Obviously I don’t. “Hard landing “? From the policies implemented by the current group of fascists, there should be complete destruction, shouldn’t there? I won’t go into it, I am sure you know what I mean. Anyway, Dr. Hunt is a great man, but his recent work will not lead one to profit. That is much more an indictment of the current US than it is of Dr. Hunt, but it is unfortunately reality.
Coming here for any insight is worthless. All on here are not worried about anything including myself. I don’t have any debt, lots of supplies, land. What am I suppose to be worried about? Inflation…meh. Inflate what. I could go a year without stuff. Except energy. I do have a large woodpile but rather not. Too much work. I wasn’t even expecting a return on my investments. Thought it was going to get ripped from me. Likely will the rate we are heading. I have pretty much accepted it at this point.
Good on you bubba I’m also pretty much self sufficient Could survive realatively unscathed unless they take us to nuclear war god forbid
Then why are you here? I am sure you can find other sites to comment on.
you don’t own the land. the government does. the history books and immigrant hoods are filled with men who learned that lesson the hard way. hope you make it alright, but don’t be so naive. amerika ain’t so special. FFS my decade in charleston SC taught me there are men who know what the federal gov is capable of……..sell your confederate dollars before the carpet baggers come to tax your land out………
All the focus is always placed solely on interest rates without considering the huge growth in money supply. M2 has come down since its peak in 2022, but is still a staggering $5T more than it was in the beginning of 2020. This liquidity sitting in cash, checking accounts, savings deposits and money market accounts is the “dry powder” that supplies the bidding pressure which influences the price of goods, services and assets.
It’s difficult to make the argument that the Fed is hawkish or running tight monetary policy when this much money has been created. Granted, the government “borrowed” and spent much of this into existence but this was made possible by the Fed printing trillions and purchasing the debt. Without the Fed’s intervention, the bond market would have revolted with sharply higher rates across the yield curve making this level of deficit spending untenable.
It will take a higher-for-longer interest rate to tame the huge growth in money supply and government spending.
Interest rates must be held low and below the true rate of inflation in order to debase the dollar and default on the national debt.
Exactly what they are doing
Great gauge of Fed policy, the NDX / SPX spread. Once that froth is diminished to at least half it’s 2000 similarity, the fed will reverse, the problem is that once the avalanche starts it’s hard to stop.
Speaking of that particular avalanche, can’t help but notice a spike on the FED balance sheet in March this year, I wonder if that had anything to do with the market’s reversal at the time.
The Fed now has QE/QT atop rate policy, I’d love to know what that March spike was…if anyone knows.
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Wasn’t that when they were insuring deposits at the banks that went under?
That’s probably it
War = more rate hikes. War always = inflation.
And the bankers sure seem to love war
let’s call it the great Zionist Ukraine WAR INFLATION trade. Powell did use the term Misery in his comments. the misery index is only half cranking. in another year or 3, both might be full throttle. any bonehead that is thinking there is any price deflation of anything worthwhile in most humans lives……..is high as BIBI on apartheid and genocide.
gundlach at grant’s interest rate shows how close we are gonna be to not being able to fund interest with a few scenarios coming true. it is the 4th turning. the idiots want more WAR and spending and think their houses are going up while it’s the currency being debauched……….
Investors didn’t take Powell’s talk today as bearish. Apparently, a large number of investors believe the fed is through raising rates and will be cutting them no later than the first half of next year.
As much as I hate a manipulated Market, I have to learn to live with it or stay out.