Inflation/stagflation Thread

Fed +0.75% it is, as expected, although markets sold off a bit.

  • FED HIKES INTEREST RATE BY 75BPS TO 3.25% VS 2.50% PREVIOUS
  • FOMC: Voted 12-0 For Fed Funds Rate Action
  • Fed Officials See Fed Funds Rate at a Median of 4.4% at End of 2022
  • Fed Median Forecast Shows Rates at 4.6% In '23, 3.9% In '24
  • Fed Is ‘Highly Attentive to Inflation Risks’
  • Fed Officials See Inflation of 5.4% at End of 2022; 2.8% for 2023; 2.3% for 2024; 2.0% for 2025
  • Fed Officials See 0.2% GDP Growth at End of 2022; 1.2% for 2023; 1.7% for 2024; 1.8% for 2025
  • Fed Sees Path of Rate Increases Continuing Through 2023
  • Fed Raises Interest Rates to Highest Level Since 2008

market reaction on the fixed income side -

  • FUTURES AFTER FOMC DECISION IMPLY TRADERS SEE 89 PCT CHANCE FED RAISING RATES ANOTHER 75 BASIS POINT AT NOVEMBER MEETING
  • US TWO-YEAR TREASURY YIELDS JUMP TO 4.121% AFTER FED, HIGHEST SINCE 2007
  • US FIVE-YEAR TREASURY YIELDS RISE TO 3.861%, HIGHEST SINCE 2007
  • US 10-YEAR TREASURY YIELDS RISE TO 3.64% AFTER FED MEETING STATEMENT, HIGHEST SINCE 2011
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So did the market sell off because 1% was seen as potentially being the last big rise, but 3/4% means it’s likely there will be another significant increase next meeting?

The odds of :arrow_up: 0.75% today were at 80% and another :arrow_up: 0.75% in November were at 50% for a few days already, so none of it is a surprise.

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Not a significant increase, no, but perhaps +25bp more than was expected. Here’s a good recap:

https://wellsfargo.bluematrix.com/links2/html/f8e86a3f-a3c7-4c42-8c4b-309827888761

The Committee hiked the fed funds target range by 75 bps, as was widely expected, but delivered a more hawkish projected path for short-term rates through this year and next. The median FOMC participant now expects the fed funds rate to rise an additional 125 bps in the two remaining meetings of this year. The FOMC sees rates staying high through next year, with the median estimate for the fed funds rate ending 2023 at 4.6%.

At some point, the FOMC will feel comfortable enough to slow the pace of tightening from 75 bps per meeting to 50 bps or 25 bps. We expected a downshift to 50 bps at the November FOMC meeting, but with today’s dot plot in hand and just one CPI report between now and the November meeting, another 75 bps rate hike is squarely on the table. The balance of risks are clearly tilted to the upside for our current forecast of a peak fed funds rate of 4.00%-4.25%.

If you look at the current market odds, they’re saying 1/3 for +50bp in Nov and 2/3 for +75bp. And then another +50bp on top of that for Dec, and then probably staying flat in the mid 4%’s range going forward.

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For those who are members. But what about the five dollar rotisserie chicken?

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Macro and Fed speculation, with nice charts

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And a pro-criminal article on how to fill more jobs.

Yeah, that part was kinda weird. I guess JPM is pushing a pro-criminal political stance, so he had to include it if possible. Normally this guys articles don’t have that kind of thing.

Of course the last email I got from JPM listed the authors pronouns in their signature, so maybe that’s how things are going over there…