Round and round we go, where the hawkish Fed stops, nobody knows…
There was a bit of tension in the markets last week. This tension stemmed from a prediction that the federal funds rate would be well on its way to a decade high even if the Fed did nothing at their November meeting.
Well, that concern has been justified. In a statement issued after the meeting, the Fed kept their funds rate at 2 – 2.25%, the same range after their September meeting.
But nothing in their statement indicated changes in their plan for another rate hike in December and three more in 2019.
In fact, a CNBC article points to a quarter point increase in December. Assuming this happens, that would send the funds rate to its highest since 2008 (see chart below):
The primary credit rate remained steady at 2.75%, according to the Fed statement. That is, until December’s anticipated rate hike.
Another CNBC article published just before the meeting statement was released had a telling statement (emphasis ours):
In recent weeks, financial markets have been gripped by worry and volatility, and some analysts think that in its statement Thursday the Fed may take note of that anxiety as a potential risk to economic growth.
The “No comment” response by the Fed didn’t seem to acknowledge this anxiety.
But the market sure seems to be in a state of worry. Since October 3rd, the Dow Jones has lost 1,566 points as this is written (even after modest recovery).
And the Yield Curve Keeps Flattening
In July, the Fed stopped highlighting the yield curve as an indicator of an imminent recession. Instead, they swept it under the rug.
But according to Patti Domm, the market is still paying attention to it:
…click on the above link to read the rest of the article…
