- June 17, 2021
- Posted by: tacapitalinvestments
- Categories: 10-year notes, 2 Rate Hikes, 2023, bonds, Economics, Fed, Fed Chair, Fed monetary policy, Federal Reserve, FOMC, FOMC Meeting, inflation, Inflation 3.4%, interest rates, James McCann, jerome powell, Liquidity, M1 Supply, MBS, Peter Schiff, Rate Hike, Sven Henrich, Treasuries, USD
The Federal Reserve on Wednesday told the public that it has forwarded the time frame for raising interest rates. “Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain,” the Federal Open Market Committee (FOMC) said in a statement.
The Meeting Before the ‘Meeting’ – Fed Expects Two Rate Hikes in 2023
- After a number of market players waited for the Federal Reserve to reveal some signals, they got some on June 16, when 13 of the FOMC’s 18 committee members projected a rate hike by the end of 2023.
- “You can think of this meeting that we had as the ‘talking about talking about’ meeting,” the chairman of the Federal Reserve, Jerome Powell noted on Wednesday. The ‘meeting’ Powell refers to is the one where the FOMC raises interest rates after keeping rates suppressed at zero.
- The so-called plot of individual member interest rate expectations, shows a possibility of two interest rate hikes in 2023. The Fed believes that at the end of 2021, the unemployment rate will be around 4.5%.
FOMC press conference: Not a single question by the media about record and expanding wealth inequality, asset bubbles, speculative behavior, or the homeless camp.
— Sven Henrich (@NorthmanTrader) June 16, 2021
- “The problem now is that demand is very strong, incomes are high, people have money in the bank accounts. Demand for goods is extremely high, and it hasn’t come down,” Powell explained on Wednesday. “But in terms of over-correcting, there is a possibility on the other side of this that inflation could actually be quite low going forward. But that is not where our focus is right now.”
- At the post-meeting news conference, Powell discussed inflation. “Our expectation is these high inflation readings now will abate,” Powell stressed to the press. The post-meeting statements from the Fed saw the inflation expectation rise to 3.4%.
- “We don’t in any way dismiss the chance that it can work out that this goes on longer than expected, and the risk would be that over time, it does begin to affect inflation expectations,” Powell remarked.
- “We’re on path to a very strong labor market,” Powell also said at the post-meeting news conference.
- The Dow Jones Industrial Average or Dow fell 260 points on Wednesday after the Fed’s rate hike signals.
- “With respect to inflation it’s the factors that have restrained it over the past 25 years, and which Powell expects to continue to restrain it in the future that are transitory,” Economist and gold bug, Peter Schiff, wrote on Wednesday following the FOMC meeting. “After years of reckless Fed monetary policy the inflation chickens are finally coming home to roost,” Schiff added.
- The Fed has ignored all the urging to slow down purchases,” said the northmantrader.com founder, Sven Henrich, after the Fed’s committee meeting. “Powell cut the rug from under any dissenters on the committee, is insisting on printing more than during the depth of the GFC w/ the hottest economy in 50 yrs, inflationary pressures & the largest asset bubble in history.”
- “This is not what the market expected,” James McCann, deputy chief economist at Aberdeen Standard Investments explained in an interview with CNBC. “The Fed is now signaling that rates will need to rise sooner and faster, with their forecast suggesting two hikes in 2023. This change in stance jars a little with the Fed’s recent claims that the recent spike in inflation is temporary.”
What do you think about the Fed explaining it may raise interest rates twice in 2023 and expects higher inflation levels? Let us know what you think about this subject in the comments section below.