FOMC 2022 1102

The Federal Open Market Committee today announced a 75 bp hike to 3.75%-4.00% in the Fed funds target. It’s solidly in line with expectations.

FOMC 2022 1102

It’s all about what comes next. First, the December decision, and then the “terminal rate”, that is, the peak rate Fed funds reaches for this hiking cycle. As much as the Fed has tried to retreat from “forward guidance”, it’s finding it a hard habit to break. Markets want to know. The trouble is the Fed itself doesn’t know. The press will try to squeeze something out of Powell in the post meeting press conference, but that turnip won’t bleed anything but vague conditionals.

I’d like to see the FOMC follow up with a final 75 basis points in December. Beyond that, it could well take a break. If however markets took that as the all clear to soar, the Fed will have to keep going, possibly at a reduced 25 bp pace, until markets do finally take another leg down. As I’ve been saying for years, asset prices lead consumer prices, and the Fed has come to see that as well, albeit via its “financial conditions” paradigm. It’s it not quite the same thing, but it has similar policy implications.

The Fed will hike until something breaks … and stock prices are an objective indicator of when that has happened.

2 thoughts on “FOMC 2022 1102

  1. Bill Terrell says:

    I’ve written for months that the Fed wants the stock market to go down. A remarkable moment from Powell’s press conference underscored the point. When Powell was informed the market was up post announcement, he immediately ticked of a list of hawkish talking points, hammering stocks. The DJIA went from hundreds of points up to hundreds of points down in minutes. It’s not just me either … Bloomberg anchor Jonathan Ferro remarked on it several times. The tape has been fighting the Fed…

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