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Possibly related - SEC Chair Gensler made comments on BB today that liquity issues increased this week (roughly paraphrased). Particularly, he noted the increased risks of leverage in the markets. Possibly something the Fed is also concerned about.
Bond & equity markets liked whatever the FOMC statement said:
Rates were maintained - fed funds 5.25-5.50%, bank reserves rate 5.4%, discount rate 5.5%. Rates are at/near peak. Rate cuts are possible in late-2024 or 2025. LT rate decline is market-driven.
QT continues at -$60 billion/mo for Treasuries, -$35 billion/mo for MBS; total -$95 billion/mo. Total QT so far -$1.2 trillion. The QT policy is independent of the rate policy. However, the Fed monitoring declining Fed balance sheet and bank reserves.
Inflation has come down without hurting the jobs market, but it is still high. Fed +2% average inflation target is reiterated. The public may be unhappy because prices remain high, but low inflation won't fix that. May be rising wages can address some of that.
Monetary policy is restrictive and acts with some lag. The Fed got behind the curve in starting the tightening and doesn't intend to repeat that error.
Job market remains strong, but wage growth has moderated.
Economy has slowed down. But it isn't expected to fall into a recession. Soft landing remains possible. Housing is flat due to high mortgage rates.
Everything is up today! Quietly I think the pivot point is nearly here. Extending bond duration has worked out nicely for us. Still November’s CPI at 3.1 is far from the 2% FED target.
Most stocks were treading water this morning. Small caps were down the most, well over a percent. At exactly 2:00 p.m., everything took off like a rocket. Amazing, or just leaked information..
FOMC Statements are embargoed by the Fed until 2:00 PM Eastern/1:00 PM Central. I try to post ASAP, with 1:0x PM Central time stamp. The Fed site is swamped right at 1:00 PM Central and its refresh take a while. My Notes follow after Powell's presser as soon as I can write them up.
Ah, thanks guys for the info. I thought maybe there was some shenanigans going on.
If you have access to streaming futures data, the time 1359-1402 is always fun on Fed day to see markets in action. The wibbles, spikes, drops, and microsecond volatility is *insane* as places jockey to position prior to the announcement and then after once it sinks in. 'Fading the rally' often was a great strategy in years past if I was tempted to play on Fed day instead of sitting and watching -- I'd sell S&P futures at a best-guess point higher and usually could be in/out of a nicely profitable trade in under a minute or two. Even better were the huge pops to the upside which then reversed over the next few hours during the press conference into the close. (of course that was before Big Algo(tm) took over trading desks and killed the fun of intraday futures trading....)
Most vocal FOMC dove has been dispatched to walk back last Wednesday events and perception. The article is behind Bloomy paywall but evidently it was based on his appearance on Face the Nation today. When the clip shows up on Youtube later today, please post here. Thanks.
Comments
Bond & equity markets liked whatever the FOMC statement said:
”Let her rip!”
VPU (Vanguard Utilities ETF)
+2%(edit) +3% todayRates were maintained - fed funds 5.25-5.50%, bank reserves rate 5.4%, discount rate 5.5%. Rates are at/near peak. Rate cuts are possible in late-2024 or 2025. LT rate decline is market-driven.
QT continues at -$60 billion/mo for Treasuries, -$35 billion/mo for MBS; total -$95 billion/mo. Total QT so far -$1.2 trillion. The QT policy is independent of the rate policy. However, the Fed monitoring declining Fed balance sheet and bank reserves.
Inflation has come down without hurting the jobs market, but it is still high. Fed +2% average inflation target is reiterated. The public may be unhappy because prices remain high, but low inflation won't fix that. May be rising wages can address some of that.
Monetary policy is restrictive and acts with some lag. The Fed got behind the curve in starting the tightening and doesn't intend to repeat that error.
Job market remains strong, but wage growth has moderated.
Economy has slowed down. But it isn't expected to fall into a recession. Soft landing remains possible. Housing is flat due to high mortgage rates.
New CPI data on Monday and PPI on Tuesday affected some of the SEPs.
https://ybbpersonalfinance.proboards.com/post/1284/thread
Yep - A rocket breaking lose from its hold-down clamps occurred to me too. - Wooosh!
https://www.bloomberg.com/news/articles/2023-12-17/fed-s-goolsbee-says-too-early-to-declare-victory-over-inflation
NY Fed Prez John Williams on CNBC on Friday - he is a permanent voting member of the FOMC as well as FOMC Vice-Chair
Now Chicago Fed Prez Austan Goolsbee - he is a current FOMC voting member (2023) who rotates off the FOMC in 2024 but will return in 2025.
Some are missing Greenspan-isms, https://www.goodreads.com/author/quotes/1334.Alan_Greenspan
Transcript (for those preferring to read)
https://www.cbsnews.com/news/austan-goolsbee-face-the-nation-transcript-12-17-2023/
https://www.federalreserve.gov/monetarypolicy/fomc.htm