Wednesday, December 14, 2022
New Import Price Index results for the month of November are out ahead of the opening bell this Hump Day, with the headline down -0.6% versus the -0.5% expected and the downwardly revised -0.4% from the previous month. This brings import prices year over year to +2.7% — down notably from the +13.0% this index brought us in March of this year.
Exports for November was slightly back toward the zero-balance: -0.3%, from the previous month’s -0.4%. Year over year, exports are still up +6.3%, though well off the May and June 2022 prints of a whopping +18.6%. Just like in most other aspects of the domestic economy, we’re returning to a level of normalcy in both imports and exports.
The big news this morning, however, is wha we’ve been talking about all week: the conclusion of the latest two-day meeting of the Federal Open Market Committee (FOMC), upon which a new Fed funds interest rate will be announced at 1pm ET today. Baked into the cake already — and frosted yesterday with cooler-than-expected CPI numbers for last month — is a 50 basis-point (bps) rate hike. It will be the first time in 15 years the rate has been this high.
It will put the Fed funds rate in a range of 4.25-4.50%, up from 0.00-0.25% until the start of March this year. Current projections (from the SEP median Fed funds rate) for the end of 2023 are for a range of 4.50-4.75%. This would imply only one more 25 bps rate hike between now and a year from now, or perhaps a ramp-up higher and then the pivot beginning to wind down rates at some point earlier next year.
The FOMC statement today will be parsed carefully to see if there are any clues in the language whether this era of aggressive rate hikes is about to come to an end. A 50 bps hike is already a step in this direction, after 75 bps hikes for four successive meetings in a row. Currently, somewhere around the 5% range looks reasonable going forward: it would, over time, be expected to suck air from the inflation balloon without, one hopes, “breaking” anything in the economy and sending us into recession.
Even though there is a wide discrepancy of viewpoints on this interest rate debate, what most people seem to agree on is that what will happen can be expected to in the first half of 2023, not in the second half. Whether we fall into recession or the Fed is able to land the inflation plane safely, at this point we expect the second half of next year to be market participants taking action on the first half — if the news is good or if it isn’t.
Questions or comments about this article and/or its author? Click here>>
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Fed Funds Expected to Come In at 50bps; Import/Exports Report
Wednesday, December 14, 2022
New Import Price Index results for the month of November are out ahead of the opening bell this Hump Day, with the headline down -0.6% versus the -0.5% expected and the downwardly revised -0.4% from the previous month. This brings import prices year over year to +2.7% — down notably from the +13.0% this index brought us in March of this year.
Exports for November was slightly back toward the zero-balance: -0.3%, from the previous month’s -0.4%. Year over year, exports are still up +6.3%, though well off the May and June 2022 prints of a whopping +18.6%. Just like in most other aspects of the domestic economy, we’re returning to a level of normalcy in both imports and exports.
The big news this morning, however, is wha we’ve been talking about all week: the conclusion of the latest two-day meeting of the Federal Open Market Committee (FOMC), upon which a new Fed funds interest rate will be announced at 1pm ET today. Baked into the cake already — and frosted yesterday with cooler-than-expected CPI numbers for last month — is a 50 basis-point (bps) rate hike. It will be the first time in 15 years the rate has been this high.
It will put the Fed funds rate in a range of 4.25-4.50%, up from 0.00-0.25% until the start of March this year. Current projections (from the SEP median Fed funds rate) for the end of 2023 are for a range of 4.50-4.75%. This would imply only one more 25 bps rate hike between now and a year from now, or perhaps a ramp-up higher and then the pivot beginning to wind down rates at some point earlier next year.
The FOMC statement today will be parsed carefully to see if there are any clues in the language whether this era of aggressive rate hikes is about to come to an end. A 50 bps hike is already a step in this direction, after 75 bps hikes for four successive meetings in a row. Currently, somewhere around the 5% range looks reasonable going forward: it would, over time, be expected to suck air from the inflation balloon without, one hopes, “breaking” anything in the economy and sending us into recession.
Even though there is a wide discrepancy of viewpoints on this interest rate debate, what most people seem to agree on is that what will happen can be expected to in the first half of 2023, not in the second half. Whether we fall into recession or the Fed is able to land the inflation plane safely, at this point we expect the second half of next year to be market participants taking action on the first half — if the news is good or if it isn’t.
Questions or comments about this article and/or its author? Click here>>