The FOMC press statement was a complete yawner. For discussion please see Fed Hikes by Three-Quarters of a Point, No Surprises.
The Fed’s Summary of Economic Projections from the meeting wasn’t.
Hikes Come Hell or High Water?
- The Fed participants have a median expectation of 4.25 to 4.50 percent for the end of 2022
- That’s another 1.25 percentage points more this year.
- The Fed then anticipates one more hike in 2023 to 4.50 to 4.75 percent.
I have to admit that a year ago I did not foresee this. But here we are.
The key question is not where we’ve been but where we are headed. I Highly doubt the Fed hikes another 1.25 percentage points this year or gets anywhere close to 4.50 to 4.75 percent in 2023.
The Fed Perpetually Chases Its Tail
The Fed will remain on auto-pilot with rate hikes until something other than housing or the stock market breaks.
Expect everything to break at once.
— Mike “Mish” Shedlock (@MishGEA) September 21, 2022
Rate hikes operate with a lag, so multiple things will break at once.
Others disagree but I think it’s a given the Fed makes a rare mistake of tightening too much.
The Fed will once again chase its tail, this time from the opposite end, tightening too much, too fast.
GDPNow Forecast for 2022 Q3 Barely Positive Following Housing Starts Report
I believe a recession has already begun. Regardless, the Fed is hiking and about to double QT smack in the middle of a very weak economy.
For discussion, please see GDPNow Forecast for 2022 Q3 Barely Positive Following Housing Starts Report
This post originated at MishTalk.Com
Please Subscribe!
Like these reports? I hope so, and if you do, please Subscribe to MishTalk Email Alerts.
Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.
If you have subscribed and do not get email alerts, please check your spam folder.
Mish
But asset prices are not going to take a major hit (as in say, a decline of 50% or more in the stock market) as the Fed would do very little QT except for some window-dressing here and there. And they would signal that they are ready to do QE again if needed (by the asset markets).
The greens look fine on my IPad, but if you haven’t used a screen calibration tool these are very good.
It appears that as long as the overall employment picture holds or the market doesn’t plunge from here, it looks like they’re going to hit that 4.5% target. You would think the overall market would have to reset even lower at that rate level, though.
Actually, Mish has been completely wrong about the Fed for 18 months now. And it is nice to see him admit that he was wrong. Though he still has not admitted that the Fed dot plots that he used to ridicule were actually pretty good.