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FED FUND rate held at 5.25-5.50%; bank reserves rate at 5.4%; discount rate at 5.5%. Possibly 1 more hike in 2023. Real & nominal rates may change differently. The base effect is in y-o-y, but the Fed also looks at monthly (m-o-m) and shorter terms changes over rolling 3m or 6m. There is some yield-curve adjustment - longer-term rates are rising more than short-term rates & that may be because stronger economy, higher supply of Treasuries, etc. Interest rate sensitivity of the economy isn't what it used to be - may be the business & household balance sheets are stronger, some consumer savings remain.
QT continues for Treasuries at -$60 billion/mo, for MBS at -$35 billion/mo (Total QT -$95 billion/mo).
New SEPs were available.
INFLATION remains high. Fed's target remains +2% average inflation. Core PCE removes distortions from volatile food & energy, but nominal PCE is also important.
Monetary POLICY remains tight - rates are higher, real rates are positive, neutral rate may be higher, ongoing QT, tight credit conditions, known lag effect of monetary policy.
ECONOMY is solid. LABOR market is strong. SOFT LANDING is plausible.
EXTERNAL FACTORS - high oil/gas/gasoline prices, labor strikes, possible government shutdown, etc. There are many uncertainties around. But pandemic related distortions seem to have unwound.
CONSUMER confidence low. Consumer credit rising. Surveys tend to be more negative, but consumer spending is strong. Higher rates affect households differently according to their wealth levels. There are ad-hoc surveys of nonprofits and community groups to assess what may be going on with low/moderate income groups.
HOUSING is mixed. Measurements are via OERs & rent/lease increases have moderated. Housing supply is constrained. High mortgage rates discourage existing homeowners (with low-rate mortgages) from moving. https://ybbpersonalfinance.proboards.com/post/1182/thread
Nice summary Yogi. Thanks. Was tied up most of afternoon so didn't follow it live. Sure turned markets on their head following a bright looking morning. This too shalt pass.
Comments
FED FUND rate held at 5.25-5.50%; bank reserves rate at 5.4%; discount rate at 5.5%. Possibly 1 more hike in 2023. Real & nominal rates may change differently. The base effect is in y-o-y, but the Fed also looks at monthly (m-o-m) and shorter terms changes over rolling 3m or 6m. There is some yield-curve adjustment - longer-term rates are rising more than short-term rates & that may be because stronger economy, higher supply of Treasuries, etc. Interest rate sensitivity of the economy isn't what it used to be - may be the business & household balance sheets are stronger, some consumer savings remain.
QT continues for Treasuries at -$60 billion/mo, for MBS at -$35 billion/mo (Total QT -$95 billion/mo).
New SEPs were available.
INFLATION remains high. Fed's target remains +2% average inflation. Core PCE removes distortions from volatile food & energy, but nominal PCE is also important.
Monetary POLICY remains tight - rates are higher, real rates are positive, neutral rate may be higher, ongoing QT, tight credit conditions, known lag effect of monetary policy.
ECONOMY is solid. LABOR market is strong. SOFT LANDING is plausible.
EXTERNAL FACTORS - high oil/gas/gasoline prices, labor strikes, possible government shutdown, etc. There are many uncertainties around. But pandemic related distortions seem to have unwound.
CONSUMER confidence low. Consumer credit rising. Surveys tend to be more negative, but consumer spending is strong. Higher rates affect households differently according to their wealth levels. There are ad-hoc surveys of nonprofits and community groups to assess what may be going on with low/moderate income groups.
HOUSING is mixed. Measurements are via OERs & rent/lease increases have moderated. Housing supply is constrained. High mortgage rates discourage existing homeowners (with low-rate mortgages) from moving.
https://ybbpersonalfinance.proboards.com/post/1182/thread