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Message is pushed the economy to recession (defined as many people will be laid off and can’t find jobs) before pausing or even restart printing. Expect more pain in stock market, rent starts to decline and house prices to drop further.
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The pain will continue for a long time because inflation will not show any signs of slowing down through the winter because energy prices are poised to surge after mid terms and as we get deeper into winter months. Fed will be forced to keep raising through Q2 2023 and this will decimate housing. Stocks have already crashed, will crash another 20% probably but real estate crash has barely started, so there is long way to go. Buckle up for some GFC style RE crash.
I don’t know whether FED will actually do it. BOSS won’t be happy if they do it, i.e. raise to @5.5% level and that too quickly.
Elections only 2 years away and recessions are bad for relection.
10% persistent inflation is worse. Plus the ultimate economic crash and social unrest that would come due to stag/hyper inflation. They would pick recession, well more specifically asset bubble pop, any day. Top 10 or 20% rich people are really driving all demand and inflation and are also the main asset holders so its better to screw them than screwing the entire 100% population.
I agree, however politicians are driven by re election wins. They will spin it by saying “no recession/jobs are still high, etc i.e. cherry pick numbers”, while in reality real incomes will be down which they will ignore and spin. They think ‘let me/my_party get reelected’ and ‘I’ll spin it , then if the thing gets worse it’s the next guy/gal’s problem’.
FED, IF it’s actually independent would do it. However like the ‘transitory’ inflation thing recently, if they keep dithering until it’s too late then we might get to the high stagflation state which will be bad.
What I heard from Q&A is JPow repeated his worry about anchored (runaway) inflation. He said businesses and investors have got the message and reducing expenses. Supply induced inflation is kind of over. However, consumers don’t follow these kind of macro news closely, they would spend so long they have money. The only way to stop them from spending money is they don’t have money to spend i.e. unemployed. Hence, rate hikes until consumers become unemployed. Frankly, no change in message for a long time, we are the ones that don’t understand his message, he has to keep repeating and expresses in different words.
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Consumers are running out of cash and fast.
" The personal savings of Americans hit $626 billion in the third quarter of 2022, according to the Federal Reserve Bank of St. Louis. That’s down from $1.98 trillion in the second quarter of 2021 and from $4.85 trillion in the second quarter of 2020, when it was boosted by COVID-related government cash. But it’s also down from $1.41 trillion in the second quarter of 2019, before the coronavirus pandemic shut down the economy and led to a wave of government benefits."
What I have read/heard so far FED committee thinks 4.6% should be enough to bring inflation to it’s knees.
Lawrence Summers says 4.6% is not enough and it should be 5.5%. Otherwise risk of stagflation.
We’ll find out who is right going forward, however in recent history Summers got it right.
I haven’t read/heard Fed’s Q&A yesterday.
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Market interprets what JPow said during Q&A is the terminal rate would be 5.5% to 6% instead of the consensus of 5%. This interpretation of an increase in terminal rate is what caused the stock market to dive.
Before the FOMC, the thinking is…
Nov 0.75
Dec 0.50
Jan 0.25
Feb 0.25
Terminal = 5%
Pause till end of year to early next year
Begin to reduce rate
IMHO, there is no change in thinking. Terminal rate stays at 5%. That’s what the mortgage industry is thinking too…
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Question: Is recession already factored in to current stock market valuations? 
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The advice from Fed is: Stay in cash, we are not done hiking.
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Not entirely. If Fed stays course, stocks can easily be down by another 25%. At terminal rate of 5.5% stocks are almost 2x over valued based on yields.
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5.5% yield = P/E 18, almost every stocks are over-valued If this is the fed rate, even mighty AAPL is over-valued.
Also keep in mind that earnings have barely started their painful and long fall. Also I was referring more to dividend yield of blue chip, not P/E. But yes stocks are overvalued even based on P/E, without even accounting for falling E.
According to @mcp, job market still excellent. So more hikes coming.
(half joking/ speculation)Fed needs some big bankruptcy in either the crypto or SAAS industry. Otherwise, hike! (end speculation)
I have to admit, visibly less crowd in restaurants and department stores. Also, is true that there are more jobs (esp blue collar type) than people looking for jobs, those available jobs are 
Better off lazing at home and collect unemployment benefits.
The reason why I think 5% is the terminal rate is because…
Ofc, I am often wrong. Fed may have other objectives.
I didn’t say excellent. Just said not too dark yet. Also keep in mind, job market is usually slow at the end of year.
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Easily get four job offers is not considered as excellent market? Then you are excellent