Overall economic activity appears to have picked up after edging down in the first quarter. 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 energy prices, and broader price pressures.
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 1-1/2 to 1-3/4 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
Statements above are excerpts from the Federal Reserve Press Release.
Largest Hike Since 1994
The hike today was the largest since 1994 and the biggest percentage increase in history.
The Fed went from 0.75 to 1.00 percent to 1.50 to 1.75 percent, doubling the low end of the range in one big leap.
Dot Plot Projections
Dot Plot Notes
- Each member of the FOMC projects where they think interest rates will be looking ahead.
- For December 2022, the median projection is 3.25 to 3.50 percent.
- The median expectation for 2023 is just one additional hike to 3.50 to 3.75 percent.
Color Me Skeptical
Color me totally skeptical the Fed gets to those targets.
The opening paragraph is questionable at best: "Overall economic activity appears to have picked up after edging down in the first quarter."
Bear in mind the Fed had to say what it did to justify it's 0.75 point hike. Otherwise it would be admitting it was hiking into a recession.
Note the clever wording "appears to have" as opposed to "Overall economic activity picked up after edging down in the first quarter."
And the Fed's projection material pencils in not only a soft or softish landing but nothing resembling a recession at all.
Are they really this stupid? Arrogant?
Retail Sales Flounder in May With Negative Revisions in April
This morning the retail sales report came in at negative 0.3 percent. Adjusted for inflation, sales declined 1.2 percent.
The Atlanta Fed GDPNow forecast fell to 0.0% for the second quarter. I will cover that in a separate report later today.
- New Home Sales Plunge 22.5% In April, 16.6% From Deep Negative Revisions
- NAR Pending Home Sales Data Provides More Evidence of a Severe Housing Slump
- The NAHB Wells Fargo Home Builder's Index Is Sinking Spectacularly
- Existing Home Sales Skid to Pre-Pandemic Level, a Housing Bust is Underway
New home sales are crashing, existing home sales are crashing, and retail sales are falling.
The average mortgage rate is now 6.23 percent and rising.
Not to worry, economic activity "appears to have" picked up.
Yeah. tell me about it.
The advance retail sales numbers for May were negative for the month and the Commerce Department revised April slightly lower.
Inflation-adjusted numbers were a disaster.
For discussion, please see Retail Sales Flounder in May With Negative Revisions in April
Congrats to the Fed for some great wordsmithing.
If the Fed really believes its nonsense no-recession projections and follows through on them, it is going to overshoot neutral by a mile.
This post originated at MishTalk.Com.
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