Posted on 09/20/2023 7:11:08 AM PDT by Kaiser8408a
The Fed’s Dot Plot, the Open Market Committee’s guesses as to Fed rate policy in the future, despite Treasury Secretary Janet Yellen saying everything is beautiful in the US economy. Then Janet, why is The FOMC siganling a rate cut from 5.6% to 3.6% by 2025?
The Federal Reserve’s dot plot for September will push back on the notion of aggressive rate cuts that the markets are pricing in for next year.
The median of indications will show that policymakers expect a decline in the benchmark rate of as little as 50 basis points or 75 basis points for 2024, compared with the 100 basis points their plot showed in June. I expect the Fed to leave its dot plot for 2023 intact, with the funds rate indicated at 5.6%.
Investors have, of late, swung between pricing rate cuts between the spring and the summer of 2024, which the Fed isn’t in a position to acknowledge based on the current strength of the US economy. The most definitive way of pushing back against that notion is to pencil in less by way of policy loosening than the central bank did in June.
Since that meeting, headline inflation has accelerated, while inflation stripped of housing and energy is still hovering above 4%. Meanwhile, the jobless rate has averaged 3.6% so far this year, around as low as we have ever seen historically — and way below what the Fed estimates will be required to bring the labor market into balance.
All told, the dot plot and summary of economic projections is what will guide the Treasury market reaction, and from the looks of it, the markets may not like what they see.
Not like what they see? Like Bidenomics??
(Excerpt) Read more at confoundedinterest.net ...
Continuing resolutions anyone?
This article makes little sense.
The Fed’s dual mandate does not include short term interest rates. It is management of inflation and unemployment.
Short term rates are a tool for that, as is Quantitative Ease and Quantitative Tightening, the last being underway for some time and forgotten. But the mandates are none of these.
The Fed’s inflation target is 2%. We are nowhere near that, and oil’s rise is sure to push the number farther away from that.
A 50 cent rise per barrel per month for 12 months in oil is a modest price move and would be 6% oil inflation for a year. If starting from $100, that would be $106. A very modest move and should it unfold, the Fed will NOT be cutting rates.
They’ll make changes to make numbers look good to folks around general election time.
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