Ticking All the Boxes
- 75 Basis Point hike to 3.00 to 3.25% – Expected
- Fed anticipates more hikes – Expected
- Quantitative Tightening (QT) of treasuries and mortgages continues – Expected
- Strong commitment to a 2 percent inflation objective – Expected
- Statement on monitoring conditions – Expected
- Fed mentioned robust jobs and the war in Ukraine – Expected
This was a short and boring press release. There were no dissents.
Here is the key snip from the FOMC Press Release.
Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.
Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is 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 raise the target range for the federal funds rate to 3 to 3-1/4 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments
Autopilot Hikes
The Fed Perpetually Chases Its Tail
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 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
Note: This was so predictable I wrote the entire post in advance. All I added was the actual verbiage from the press release and even that barely changed from July.
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Mish
1. SPX E/P now lower than 18-month Treasury maturity (avg of 1- and 2-year): 3.9% vs. 4%+
2. Technicals of both the SPX and DJIA.
3. September-October has brought some of the worst stock crashes.
Look out below!
Then there are the hospitals. That one’s a sleeper. We’ll be hearing a lot about their financial distress in the coming months. It’s going to be ugly.
I missed much of the energy bonanza this year and I want in. I figure the energy shortage is real and whatever breaks the market will be a buying opportunity for energy.
I’m saving every penny I can in cash for that, but also keeping some gold and fertilizer investments. They’ll probably fall, but I’m in it for the long haul.
I’d rather buy 3 months before they stop rising than buy 3 months after they’ve stopped rising.
If I had a crystal ball I’d be rich.