Well the day for a interest rate hike is here–seems like it was just yesterday that we had the last hike in the Fed Funds rate.
I am guessing a 75 basis point hike is in the cards–a 100 point hike is possible, but while I think the Fed wants asset prices lower I would be a bit surprised at a 100 basis point hike–but no one knows for sure.
Jay Powell’s press conference will be more telling–I think he will acknowledge economic conditions are softening a little, but will send a message that the Fed is data dependent, but at this time data is inadequate from which to ponder the next rate move.
After the shellacking that we have taken in the last month I am hoping for a bit of a relief rally (in bonds) of sorts once the interest rate decision is announced. Obviously no one knows what will happen to rates and with the added burden of quantitative tightening ramping up any forecast by anyone is a total wild ass guess.
75, as expected. And the market tanked when it did just what most people expected. Go figure.
And… as Tim suggested, just a bit later, markets back up again. Crazy, especially for when “what was expected” is what happened. Golly. I’m not a big roller-coaster fan — but we’re on one, just have to hang on, and perhaps occasionally scream… 😉
Dave the best part is that the 10 year is now off 5 basis points which is helping keep preferreds positive for the day.
The Fed was late to react on the early inflation figures last Oct. 2021 and is now on a stellar mission to catch up. It will continue to overreach until it breaks the rear-view mirror. For those who remember 1980-82 it is a story told before.
Well, from 1980 I remember a cute girl walking into our Intro to Engineering class. I had heard of her academic achievements 6 months earlier, but I didn’t know what she looked like. I knew her the instant that she walked in the door, and I still remember every detail of how she looked and what she wore. She, of course, completely ignored me during our next 4 years as classmates. I never would have believed that she would become my wife (just celebrated 34 year anniversary with a whale-watching hike in Montana De Oro). The remaining 1980-82 period was just a blur of classes, jobs, and very little sleep. I don’t remember the Federal Reserve in 1980, nor did I care. Today, however, I care about them both.
I also remember that I could work 50 to 60 hours per week in the summer at a $7/hour job and save enough money to pay for an entire year of college, including tuition, books, fees, apartment, and food (no car or dating). Even at the entry-level pay of $15 to $20 per hour, today it would be impossible to save enough in the summer to pay for 1 year at a university.
1980 inflation is instructive with many parallels but not totally similar. Problem started building at least 10 years earlier. Burns was a weak Fed chairman who got pushed around by politicians. Carter’s cluelessness ignited the flame but he probably gets more blame that should be shared. Volcker’s enormous rate hikes get credited though some economists believe he overdid it and then pivoted too soon causing the recession to last a couple years longer. Reagan got credit for the recovery though he did start the massive increases of the debt and he stole form SS, actions we’re paying for today.
100 pts would be prudent.
Tim, I agree…I think 100 points would spook the markets which no one wants. IMO, the markets will come down move efficiently with a steady hand.
Tim…we hope he does the right, thing, to raise less then .75 basis point…he is too, too, extreme both ways. Georges