Federal Reserve – Page 9 – Digital Finance Analytics (DFA) Blog

FedSpeak Brings Out The Bulls!

Fed Chair Powell gave an address overnight which set the markets running higher. The FED will lift rates further but perhaps more slowly. The markets liked that with the Dow moving into bull territory.

And in Australia, ANZ has up forecast future rates here, higher for longer.

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Another Topsy Turvy Day!

Monday ended up a down day on Wall Street ‘s main indexes ended lower on Monday, as investors digested comments from U.S. Federal Reserve officials about plans for interest rate hikes.

Losses accelerated toward the end of the up-and-down session, with focus turning to Tuesday’s producer price index report and markets highly sensitive to inflation data. real estate and discretionary sectors leading broad declines.

The Fed Outings included Christopher Waller on Sunday who said the Fed may consider slowing the pace of increases at its next meeting but that should not be seen as a “softening” in its commitment to lower inflation. Monetary policy tightening “isn’t ending in the next meeting or two”, and Fed Vice Chair Lael Brainard who signalled that the central bank would likely soon slow its interest rates hikes but added that there still was “additional work to do on raising rates.”

“There is still a sensitivity to Fed speak… One was a little hawkish, one was a little dovish,” said Eric Kuby, chief investment officer at North Star Investment Management Corp.

Today’s post is brought to you by Ribbon Property Consultants.

Fed Signals Higher For Longer And Markets Crater! [Podcast]

As Central Bank Rate Fest rolls on from the RBA on Tuesday, as expected the FED lifted the US interest rate target by 75 basis points overnight and reaffirmed continued hikes ahead. Later tonight we will get the Bank of England announcement, which is also expected to hike big.

The Fed’s unanimous decision lifted the target for the benchmark federal funds rate to a range of 3.75% to 4%, its highest level since 2008. “Slower for longer,” declared JP Morgan Chase & Co, chief US economist Michael Feroli in a note to clients. “The Fed opened the door to dialing down the size of the next hike but did so without easing up financial conditions.”

As a result, U.S. stocks ended sharply lower on Wednesday, with the S&P 500 suffering its worst rout on a Fed decision day since January 2021, as comments from Fed Chair Jerome Powell shattered initial optimism over a Fed policy statement that raised interest rates by 75 basis points but signaled that smaller rate hikes may be on the horizon.

The FED said its battle against inflation will require borrowing costs to rise further, yet signaled it may be nearing an inflection point in what has become the swiftest tightening of U.S. monetary policy in 40 years.

“It’s as if investors came to a haunted house and got candy, but once they unwrapped it, saw it was soggy broccoli,” said Max Gokhman, chief investment officer at AlphaTrAI.

The latest edition of our finance and property news digest with a distinctively Australian flavour.

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

Fed Signals Higher For Longer And Markets Crater! [Podcast]

00:00 / 00:23:34

Forget The FED Pivot – And Housing Price Falls Won’t Stop Them Either!

To no one’s surprise the Federal Reserve delivered its third consecutive 0.75% rate increase on Wednesday as the Federal Open Market Committee raised its benchmark rate to a range of 3% to 3.25% from 2.25% to 2.5% previously. It was all pretty much as expected although his specific comments on the housing market may have shocked some. He said effectively that dropping home prices won’t stop the quest to strangle inflation. Property bulls please note.

So, after this latest rate hike, the Fed has now lifted its benchmark rate by 300 basis points, or 3% in just six months as the central bank accelerates policy to restrictive territory with the aim of slowing growth enough to make a meaningful dent in inflation.

“We can’t fail to do that,” he said, referring to the central bank’s mission against price growth. “That would be the thing that would be most painful for the people that we serve. We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t. What we need to do is get rates up to the point where we’re putting meaningful downward pressure on inflation. That’s what we’re doing. We haven’t given up the idea that we can have a relatively modest increase in unemployment.”

But critically, there were no signs of easing its push into restrictive territory as it battles to cool the embers of inflation.

“We’ve just moved into the very, very lowest level of what might be restrictive [territory],” Powell said in the press conference that followed the monetary policy statement. “In my view, there’s a ways to go.”

As a result, the Fed now sees its benchmark rate rising to 4.4% in 2022, above the 3.4% forecast in June, paving the way for further front-loading of rate hikes in the remaining two Fed meetings for the year and into 2023.

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing alongside you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Is It Time For A Soft Landing? With Tarric Brooker [Podcast]

My latest Friday afternoon chat with Journalist Tarric Brooker. We look at the latest data and discuss the implications.

His charts are at: https://avidcom.substack.com/p/charts-that-matter-16th-september

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

Is It Time For A Soft Landing? With Tarric Brooker [Podcast]

00:00 / 01:05:42

Speculators Let Rip As Central Banks Talk Up Higher Rates… [Podcast]

I believe the markets are still not fully factoring the evaporation of a FED pivot at least for now, despite the intense and heightened rhetoric. Indeed, as I discussed yesterday, the current bout of inflation has predominately been caused by over stimulation thanks to ultra-low-rate settings, quantitative easing and loose fiscal measures (i.e., Government stimulus).

The truth is this is now coming undone. Thus, I do not regard the slight end of week upswing as a significant turn. As normal, we will start in the US, such a globally dominate market, then cover Europe, Asia and end in Australia.

Digital Finance Analytics (DFA) Blog

Speculators Let Rip As Central Banks Talk Up Higher Rates... [Podcast]

00:00 / 00:32:49

Speculators Let Rip As Central Banks Talk Up Higher Rates…

In this week’s market review we explore the fragile upswing in the second half of the week, which can best be understood as a positioning by speculators, betting on a falling market, typically seen as part of a bear market rally sequence, then anything substantive. I believe the markets are still not fully factoring the evaporation of a FED pivot at least for now, despite the intense and heightened rhetoric.

Indeed, as I discussed yesterday, the current bout of inflation has predominately been caused by over stimulation thanks to ultra-low-rate settings, quantitative easing and loose fiscal measures (i.e., Government stimulus). The truth is this is now coming undone. Thus, I do not regard the slight end of week upswing as a significant turn.

As normal, we will start in the US, such a globally dominate market, then cover Europe, Asia and end in Australia. Go to the Walk The World Universe at https://walktheworld.com.au/

Operation Jawbone? The Jackson Hole Fall Out!

How will global investors react to the overriding message from the Central Bankers Lovin-in at Jackson Hole? Aussie markets were 2% down on Monday morning.

Federal Reserve Chair Jerome Powell’s stern message was that interest rates are going higher for longer in a painful fight against inflation. Be clear, he quashed thoughts that the trajectory of monetary tightening could soon be tempered.

Investors now see the Fed’s policy rate peaking in March at around 3.80% and pared bets on a decline in 2023. The US yield curve between the five and 30-year maturities inverted for the second time this month, while the gap between the higher two-year yield and the 10-year rate widened.

The inversions suggest the bond market anticipates a recession is the necessary sacrifice to get price pressures back under control. Though I note already, some bank economists are saying, this is all talk, because the bond market hardly reacted.

Expect to hear more on the trade-off between higher rates of inflation and higher unemployment, and whether the 2-3% targeting which has become a cornerstone of Central Bank doctrine is relevant. Meantime, other than commodities, and the USD, there is nowhere to hide – and Bitcoin came down in sympathy.

Go to the Walk The World Universe at https://walktheworld.com.au/

Central Planners Double Down On Beating Inflation But…

Remember when the mantra from Central bankers was inflation was temporary? This was still being recited late last year, despite the rapidly expanding money supply created by the reaction to COVID (which had already been expanded by the reaction to the GFC in 2007 and beyond.

Ultra-low interest rates were coupled with excessive Government fiscal support from direct payments to businesses and households, and indirect support to businesses. This combined stoked home prices, and credit growth, in an attempt to maximise employment and sheeted inflation mainly to supply chain disruptions which would sort themselves out. RBA Governor Lowe late last year said no rate rise until 2024, and only recently changed his tune.

But fast forward just 6 months, and the tone has been changed completely, with a bevy of the world’s top central bankers delivering a stern and unified message on the need to curb inflation, declaring at Jackson Hole that it is broad based, here to stay and will require their forceful action. Like lemmings, they are now all running to the “must kill off rampant inflation at all costs” exit instead.

Begs the question, were they wrong then, or are they wrong now? And whilst they plan to lift rates significantly higher, will it actually tame inflation or not? And what collateral damage will these rate increases cause? I for one have little confidence in the whole Central Planners and Bankers edifice. They are of course unaccountable, and unelected.