As expected, the Fed held rates steady. But Powell is uncertain about what the Fed is doing.
FOMC Statement
Please consider the Federal Open Market Committee (FOMC) Statement on September 20, 2023, emphasis mine.
Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong, and the unemployment rate has remained low. Inflation remains elevated.
The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent.
Key Takeaways
- Inflation elevated
- Tighter credit weighs on activity
- Impact of tighter credit on inflation is uncertain.
- Committee is highly attentive to inflation risks
The rest of the statement is typical boilerplate about monitoring inflation and balance sheet reduction.
Warning Shot
The above takeaways about uncertainty and inflation risk is a clear warning shot that the Fed will hike more if warranted.
The Inflation Front
The Fed is right to be concerned over inflation.
Unions are winning huge contracts, manufacturing productivity is in the gutter, and Biden’s energy policies are highly inflationary.
For discussion of productivity, raises and energy policies, please see Does the UAW United Auto Workers Union Merit a Huge Raise?
Also note the energy crunch. The Demand for Diesel and Jet Fuel Soars But Refining Capacity Sinks.
Refining capacity is down thanks to the Biden administration’s attack on oil, and the unwarranted push for more EVs before the infrastructure is even in place.
There is a rather full spectrum of opinions here about the Fed:
They are morons
They are geniuses
They are doing what their “master” tells them to do
They are protecting the big banks
They are intentionally screwing the little banks
They are trying to make US citizens poor
They want high unemployment
They want low wages
They are assisting the 1% or the 10% of wealthy folks
They are part of a conspiracy to destroy the country
And so on
And after reading people’s amazingly confident predictions (on this blog, or anywhere else) about what the Fed “will” do; only one conclusion is possible. No one knows.
In addition, no matter what any of us “think” the Feds goals or abilities are; there is nothing that any of us can do about it.
It’s the same for most economic predictions here. Though they tend to slant towards doom and gloom. Recession, depression, runaway inflation, deflationary collapse, stock market crash, $40 oil, and so on.
Yet, no matter how wrong people’s predictions are, many continue to exude confidence that they know what is going to happen. Or they simply stop commenting when their embarrassingly incorrect predictions don’t come true.
Like everyone here, I try to make a few predictions as well. I base my predictions on long term trends and where those trends will take us going forward. And then I attempt to figure out how to take advantage of the trends. And I put my money on these best guesses and predictions.
As many here know, my focus is on energy trends and oil companies. In a nutshell, the world keeps demanding more energy every year. And 80% of that energy still comes from fossil fuels. But because of the “energy transition” that the world has been attempting for the last two decades, oil companies are reducing capex, limiting future production, putting upward pressure on prices, and focusing on generating cash flow and profits instead.
I am simply trying to profit from those long term trends. And I don’t think the Fed will impact those long term trends very much. So, I mostly ignore what the fed is doing.
Choo! Choo!
Gasoline is still screaming upwards in price here in Los Angeles…very inflationary
mor$ons. stop increasing rates and LEAVE RATES on same level for 3-5 years!
economy=people will adjust.! we always do!
do I understand this info correctly?
clueless mor$ons at FED INCREASE FED RATE NOW AND SAME TIME CONTEMPLATING TO DECRESE RATES NEXT YEAR a few times?
wow. think about clueless and having no idea what they are doing!
I read somewhre at fed there are about 1000+ PHDs
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mor$ons. stop increasing rates and LEAVE RATES on same level for 3-5 years!
economy=people will adjust.! we always do!
alx
I was surprised the Fed didn’t hike. Amazon announced hiring 250k people, Target 100k and others in the tens of thousands. I know people here don’t like to believe the JOLTS, ADP payrolls, or other jobs numbers but we are already getting announcements about hiring already. Add to it that tens of thousands of boomers are retiring and I don’t know how we don’t get another wage squeeze over the next quarter.
https://apnews.com/article/amazon-target-holidays-jobs-pay-7611ca4843494266ae39f8ac5f84de8f
Add to it oil at $90+ and that hasn’t trickled down to everyone just yet and inflation is going to look very ugly in October, November and December. God help us all if we have a really cold winter or there are supply chain disruptions.
Not to worry MPO. They kept a lid on inflation for June, July and August so the Social Security COLA will be moderate. That’s what is important. Won’t matter so much if now inflation takes off again.
been saying this since the rate increases, the FED is just reloading bazooka back up from zirp, so when the big banks need bailouts they have the ammo. the rest of this discussion is rubbish and truly ignorance. all the jawboning on this site and most miss the actual game. it warms the cockles of my heart to know how dumbed down the competition for hunting and gathering truly is. owners and serfs. the big banks own the fed. think like an owner.
Can someone please explain this?
This guy doesn’t seem to understand that the reason any of this is going on is because the government printed trillions of dollars and flooded the world and the U.S. with dollars. It is the fault of the government and spending out of control on everything. More and more and more every year.
Why doesn’t this guy blame the congress etc. Consumers are spending money because they have no choice but to spend more. Why does he keep saying it’s their fault etc.
It takes diesel to run the world, not gas. Higher oil is higher diesel. Higher interest rates, operating cost etc only gets passed down to the consumers. So they have to spend more.
Nothing he is talking about is addressing the fundamentals and no one is forcing him to answer relevant questions.
This will take 10 years or more if they actually started being responsible now which they will not. So it is only going to stay like it is or get worse. I am betting worse.
Am I losing my mind?
powell has only one goal. to keep the NYC banks solvent. all his jawboning is BS. mish thinks powell is dumb. nope. he’s just a carnival barker grifter for the big boys that own the empire. owners and serfs. think like an owner.
He is paid for being cluless!
this whole =independence fed= setup done so Congress, people who actually
are in charge by constitution have plausible denial – It is not us. It is fed’s fault.
Real interest rates are likely to rise as a result of inflation falling, and the fiscal deficits rising.
SPX is down to close Aug 25/28 gap. Biden is an Iceman ==> Trump inverse.
The Fed is really concerned about inflation. It really is. Which is why it held rates steady.
They might raise rates. They really might. So live in fear.
That Focker keeps costing me money.
Same bs. There are 7TD until Sept 29. The Dow might close > 34,712, Dec
2022 high. If above the Dow might rise.
The FED won’t be cutting rates soon. Maybe they will even goose the rates another 25 basis points …for good ole times. Seriously, who is surprised?
Poor Wall Street….apparently always the last to know….as they built their investment models on a hope and a prayer. “Well Mister, that will teach you,” (but it won’t of course).
Oh, and do you remember a long long time ago —well actually it wasn’t that long —that there was doubt on this board that the FED would raise rates even a full point, or two.
“Fires Warning Shot ” – what an exaggerated way of describing more Fed bloviation while inflation grows and more deeply implants itself into the American psyche. If they don’t want to raise the EFFR, they need to increase QT and divest more treasuries and MBS (which they had no business purchasing in the first place). Inflation will never be reined in talking about it. That ‘warning shot’ went right through the vital organs of the small subset of Americans who treat finances and debt prudently.
An analyst on one of the TV squawk shows says auto delinquencies are worse now than the GR. Makes sense given that the average car payment is pushing $800. While I agree with your point, I can see why the Fed is “still” slow to do anything that might be perceived as rash.
I don’t think a recession is in the cards for 2023, but I do think the economy is going to continue to decelerate. Given the Sept pass and there being 5 weeks until the next meeting, I’m sure JPowell is hoping the UAW strike creates additional deceleration in the economy. I hope they raise in Oct/Nov and the signs of higher inflation causes additional pressure.
It would be nice for there to be a 1,500 point drop in the DOW between now and the next FMOC meeting and then another 3,000 point dip by Thanksgiving. We need downward pressure on the stock market for some wealth effect destruction to help spur a recession.
The FED is waiting to see the effect of their rate hikes to determine their next move.
The FED is just tap dancing because practice makes perfect.
Powell is holding his breath for the bond market to rally so he doesn’t have to raise rates.
Let’s face it! The Fed is run by the big banks and they will only do the things that make them money despite what the political puppets say or direct them to do. Figure out what’s good for them, do it, and you will beat the system. Sometimes, most times, the simple obvious solutions are the correct ones.
Most people do not realize that Powell as Chairman of the Board of Governors of the Fed is actually a US Federal Government employee. He serves at the pleasure of the President and can be replaced at any time. To the extent that the Federal Government’s and Big Banks’ interests are aligned and being served, his job is safe. At some point, higher rates benefit the Big Banks far more than the Federal Government. We are probably there already. More than one or two additional hikes and his job could be in jeopardy.
The future is inherently uncertain, but the past is open to analysis. Did this institution ever blame itself for reckless policies for the future uncertainties?
Standard checking and savings accounts are still getting like 0.01% interest rates, so yes the big banks are cleaning up as most people won’t bother searching for higher rates, even if they had any money to save!
Absolutely! The Fed IS the big banks. That’s the way it was formed, and it is run to keep the big banks solvent. That is the Fed’s total purpose. I am not ranting about this – this is literally the sole reason for the Fed’s creation.
100% correct. the nyfed is where the action happens too. privately owned. not the powell position.
I don’t think the FED raising rates as fast as they did was good for banks. Several went under because of it and most are seeing some stress from it. So, while I agree their primary function is keeping the banking system sound, they also need to keep the overall economy stable. And sometimes the 2 are in conflict. They had to do something about inflation even if it hurt bank profits.
wrong. the NYFED is owned by the NYC banks. they have spent a century kicking the regional banks to the curb and taking their business. like the recent unpleasantness you refer.
… as do all the other 11 Federal Reserve Districts. They all starved off the regional banks under them. Back in the late 90’s they all tried to get CONgress to remove the charter for credit unions. Same same.
for a century now, they have put thousands of “country” banks out of business. the first 2 central banks of us also did the same. FFS i am still amazed how many men “in finance and economics and business” have NO CLUE about what the game is. like playing ice hockey or hunting, with a blind fold on.
Definitely more T-Bills. Watching JPow on TV now.
Personally I would rather watch on TV, Hafize Gaye Erkan, the relatively new Turkey central bank chief. But, to each their own , I guess.