Here’s today’s FOMC statement:
Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.
Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3-3/4 to 4 percent . The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities , as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Calculated Risk on Powell’s press conference:
this was the key sentence from Fed Chair Powell’s press conference: “the ultimate level of interest rates will be higher than previously expected”.
Powell also said that “At some point it will be appropriate to slow the rate of increases”, but he said that might be in December or in 2023.
Slower pace, but higher terminal rate:
Looks like the Fed won’t stop until it destroys the economy.
The biggest problem is that the FOMC statement, which is signed by all the voting members including JPow, looks quite dovish and reasonable. Its list of inflationary factors like supply chain bottlenecks and the Ukraine war are transitory in nature. It even mentions the lag word.
But then JPow’s presser is a complete opposite. He came out gun blazing and super hawkish. But we don’t know how many voting members share his hawkish view.
This type of two-facer is super not helpful.
Yes. That’s why I said he’s doing some serious double speak. The market was up on the statement then crashed on the conference. They should just say they have no clue and will adopt a rate policy that matches market expectations. That’s been happening for years anyway.
The Fed can manipulate the market however they want, but long term investment into growing, innovative companies will ultimately bring home the bacon.
Face ripper’s top TA guy:
Rumor that China is ending the zero-Covid policy. True?
VIX actually dropped on Thursday, after JPow tried to kill the market with his hawkish talk Wednesday afternoon.
Nope. How can it be true? If China ends 0-Covid, millions will die, and credibility of Xi’s government will go to the toilet.
China spent the last two years scaring its own people day and night how dangerous Covid is, and the Chinese people believe the propaganda. Western journalists often write stories from Western perspective, and imagine Chinese people want freedom as much as Western people do. Everyone wants freedom, but the question is always how much they are willing to pay for it. Chinese propaganda keeps reminding people more than a million people died of Covid in America.
So before China ends 0-Covid, they will have to undo their own propaganda. It takes time. China also has to build out its medical infrastructure. Westerners look at Shanghai and Shenzhen and imagine the entire China is like those glimmering cities. Not at all. Just venture into 3-tier or lower cities or the rural areas and poverty is still widespread.
So even if Xi made the decision today, the fastest China can get off 0-Covid would be the end of 2023. And I don’t see any indication he wants to end it. The green code red code system has proven to be so good a population control measure I don’t think the CCP ever wants to let go.
The latest data from China: cumulative confirmed cases: 8510115. Cumulative deaths: 28670, cumulative cures: 358088. I won’t believe the number 28670
like a joke
There is no standard way of classifying death from Covid.
China underreports to please their political governance.
USA overreports to get lucrative funding.
Actually the US under reported Covid deaths. It is difficult to assign cause of death. If a patient died from a heart attack but he also had Covid, what is the cause of death?
A better way is to look at “excess deaths”:
Researchers have tried to quantify the total net mortality burden of the COVID-19 pandemic by examining how observed counts of deaths during a specific time period differ from the expected number of deaths during the same time period based on data prior to the pandemic. These “excess deaths” thus provide a measure of the extra number of deaths from all causes during the pandemic relative to what would have been expected had the pandemic not occurred.
The World Health Organization (WHO) recently released a report showing that the full death toll associated with the COVID-19 pandemic in 2020 and 2021 was approximately 14.9 million worldwide, much higher than the official death toll from COVID-19 reported over that time period, which was 5.42 million.
For the United States, the Centers for Disease Control and Prevention (CDC) estimates that excess deaths between the weeks ending March 7, 2020 and March 5, 2022 totaled 1,105,736, 15 percent more than the 958,864 official death toll from COVID-19 over that period. Figure 1 shows excess deaths in the United States over time, along with reported deaths from COVID-19. As shown in the figure, while the number of excess deaths is correlated with reported COVID-19 deaths, in general, excess deaths exceed reported COVID-19 deaths.
How do they account for all the people that died of non-covid things while healthcare facilities had reduced capacity? They are counting them as covid related based on their methodology, but those people didn’t die from having covid.
US hospitals reported anyone with covid as having died of covid even if that wasn’t the cause. That’s because there was extra government funding for every patient they saw with covid.
By that logic, fewer people died in car crashes as they weren’t on the road nearly enough.
Thats your own deduction because you see the financial incentives for misreporting. There is no data to back up the claim there is widespread intentional misreporting.
Can I assume everyone is cheating on their taxes because there is financial incentive for doing so?
That would be the case if no penalty
In any case, nearly all nations under report the number of cases, impossible to test everyone Again Singapore because tiny enough rich enough
US number is off by 15%. Singapore number is off by 77%.
A report on excess mortality published this week by Singapore’s Ministry of Health details a higher than usual number of deaths in the country from 2020 to June 2022.
The research puts the number of excess deaths from the beginning of 2020 to June 2022 as 2490 – taking into account the ageing of the population – with an official COVID-19 death toll of 1403.
Lots of Fed officials giving interviews the last two days. All saying they need to slow down the pace. So looks to me it’s a done deal. December will most likely be 50bps. January is too early to call.
I don’t think we need to pay much attention to the terminal rate guessing game. Nobody know how high it will be, including the Fed.
Face ripper made a good point that a slower pace is much less volatile and unpredictable, and the market likes predictability.
The 10Y also didn’t move much. Market is calling the Fed’s bluff.