{"id":1436727,"date":"2023-11-01T18:00:00","date_gmt":"2023-11-01T22:00:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1436727"},"modified":"2023-11-01T18:00:00","modified_gmt":"2023-11-01T22:00:00","slug":"fed-remains-paused-acknowledges-tightening-financial-conditions-are-doing-its-job","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/fed-remains-paused-acknowledges-tightening-financial-conditions-are-doing-its-job\/1436727\/","title":{"rendered":"Fed Remains ‘Paused’, Acknowledges Tightening Financial Conditions Are ‘Doing Its Job’"},"content":{"rendered":"

Fed Remains ‘Paused’, Acknowledges Tightening Financial Conditions Are ‘Doing Its Job’<\/span><\/p>\n

\n

Tl;dr:<\/strong><\/em> The Fed kept rates unchanged, as expected but the addition of one word is key<\/strong>:<\/p>\n

\u201cTighter financial <\/strong>and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation.\u201d<\/em><\/p>\n

Is that The Fed sending a message to Janet Yellen: “stop spending like drunken sailors.”<\/p>\n

*\u00a0 *\u00a0 *<\/p>\n

Since The Fed’s last statement and press conference on September 20th, the market’s movements (impacted by the ongoing chaos in Israel also) have been somewhat remarkable.<\/p>\n

Bitcoin has soared higher, stocks and bonds (the latter worse than the former) have both been hammered as gold and the dollar have rallied in unison…<\/p>\n

<\/a><\/p>\n

Source: Bloomberg<\/em><\/p>\n

We note that Gold has been on quite a path in the last two months but is back\u00a0 – again – at around the same levels as it has been for the last two FOMC meetings…<\/p>\n

<\/a><\/p>\n

Source: Bloomberg<\/em><\/p>\n

Additionally, The Fed’s jawboning of “higher for longer” is increasingly being accepted by the rates market<\/strong> as the SOFR spreads for Dec 2023-2024 and 2023-2025 have surged since the last FOMC…<\/p>\n

<\/a><\/p>\n

Source: Bloomberg<\/em><\/p>\n

Of particular note, we have seen financial conditions tighten significantly since the last FOMC<\/strong> (while at the same time, macro surprise data has improved marginally – not fallen apart)…<\/p>\n

<\/a><\/p>\n

Source: Bloomberg<\/em><\/p>\n

Specifically, the period since the last FOMC brought some surprisingly strong readings on inflation and the economy more broadly.<\/strong> Here are some headline numbers:<\/p>\n

Third-quarter GDP growth was a whopping 4.9%, higher than forecast and an a historic figure for the US, where growth tends to hover around 2%-3%<\/p>\n

September payrolls were also strong, with employers adding 336,000 jobs, nearly double what economists had been expecting<\/p>\n

A variety of inflation indicators cooled less than anticipated, or posted slight gains. The employment cost index, a broad and reliable indicator, ticked up 1.1% in the third quarter, a pace far above its pre-pandemic average of 0.7%.<\/p>\n

However, the last chart above is of increasing relevance as the narrative that “the market is doing The Fed’s job for it” continues to keep hopes alive<\/strong> that Powell and his pals are done (due to this dramatic tightening).<\/p>\n

For today, expectations are for no change<\/strong> (0.5% odds of a rate-hike priced-in), but the market remains more dovishly priced still than The Fed’s projections (at least until 2026)…<\/p>\n

<\/a><\/p>\n

Source: Bloomberg<\/em><\/p>\n

The Fed statement is expected to be more or less identical to September’s.<\/p>\n

And so, what did we get?<\/strong><\/h2>\n

The Fed – as expected – left rates unchanged:<\/p>\n

*FED HOLDS BENCHMARK RATE IN 5.25-5.5% TARGET RANGE<\/strong><\/em><\/p>\n

The Fed leaves more hikes on the table:<\/p>\n

*FED REPEATS IT WILL ASSESS EXTENT OF ADDITIONAL POLICY FIRMING<\/strong><\/em><\/p>\n

And sure enough, as we noted above, The Fed likes the market doing its job for it, specifically adding reference to tighter “financial” conditions<\/p>\n

\u201cTighter financial <\/strong>and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation.\u201d<\/em><\/p>\n

The message is clear:<\/p>\n

addition of “financial” = Powell to Yellen: “stop spending like a drunken sailor”<\/p>\n

\u2014 zerohedge (@zerohedge) November 1, 2023<\/a><\/p>\n

The question we are left with is – what is the trigger for The Fed to not ‘leave the rate hike option’ on the table.<\/p>\n

Read the full redline below:<\/p>\n

<\/a><\/p>\n

Powell’s press conference is coming right up but we note that despite everything very much ‘as expected’, the market is uneasy and the implied-implied move in the S&P tomorrow is 0.89%, which would make it the highest implied move since May<\/strong> according to Goldman.<\/p>\n

Here’s what to expect (assume a ‘hold’)<\/p>\n

<\/a><\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nWed, 11\/01\/2023 – 14:00<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/markets\/fed-0<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Fed Remains ‘Paused’, Acknowledges Tightening Financial Conditions Are ‘Doing Its Job’ Tl;dr: The Fed kept rates unchanged, as expected but the addition of one word…<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1436727","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1436727","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1436727"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1436727\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1436727"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1436727"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1436727"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}