Fed hikes rates by a quarter percentage point, indicates increases are near an end
Source: CNBC
The Federal Reserve on Wednesday enacted a quarter percentage point interest rate increase, expressing caution about the recent banking crisis and indicating that hikes are nearing an end.
Along with its ninth hike since March 2022, the rate-setting Federal Open Market Committee noted that future increases are not assured and will depend largely on incoming data.
“The Committee will closely monitor incoming information and assess the implications for monetary policy,” the FOMC’s post-meeting statement said. “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.“
That wording is a departure from previous statements which indicated “ongoing increases” would be appropriate to bring down inflation.
Read more: https://www.cnbc.com/2023/03/22/fed-rate-hike-decision-march-2023.html
Article updated.
Original article and headline -
The Federal Reserve on Wednesday released its decision on interest rates following a two-day meeting.
This is breaking news. Please check back here for updates.
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Remember that the Fed looks at the core number to project future inflation, not the all-items number. People can be pissed off all the want to be about that, but that's life in the big city. (Another thing is they look at the core PCE mainly, not the core CPI, but they aren't oblivious to other data, although some may think so).
CPI Links
http://www.bls.gov/news.release/cpi.nr0.htm
CPI: http://data.bls.gov/timeseries/CUSR0000SA0&output_view=pct_1mth
Core CPI: http://data.bls.gov/timeseries/CUSR0000SA0L1E&output_view=pct_1mth
The rolling 3 month annualized average for the CPI rose from 3.2% to 4.0% in the latest report. Not a big rise, but a rise.
And that of the core CPI rose from 4.4% to 5.2%.
No serious person who is interested in the CURRENT or RECENT inflation rate really gives a fat whoop and a holler about what the 12 month figure does -- that has several months of ancient data in it.
And in rolling averages, the number that drops out of the series at the beginning is just as important in changing the rolling average as the new number that has just been added. 12 months ago the CPI one month number was 0.7%, and the core CPI was 0.5%, and these are dropping out of the 12 month average. Fat whoop? Big holler? I don't think so.
Sorry but inflation isn't cooling. I continue to vote for "stalled at more than twice the Fed's target with a worrisome uptilt at the end" (see later on down when I discuss the core PCE -- classically the Fed's preferred inflation indicator for future inflation predictions -- and the other indicators. And the 3 month, 6 month and 12 month rolling averages of the core PCE).
There is nothing magical about the 3 month rolling average either - I chose it for its recency, and yet it is more than one data point so people can't dismiss it as a "one off" so readily.
For the CPI, I only have the month by month numbers in graphical form, below. (I don't give a fat whoop about 12 month rolling average graphs, which are ubiquitous everywhere).
CPI Graph updated with the February numbers
Again, I see an uptrend in core CPI (the blue bars) since November.
PCE Inflation
PCE, rolling 3 month averages, annualized
7.2% 7.3% 7.4% 6.2% 4.8% 2.1% 4.2% 3.8% 3.2% 4.0%
CORE PCE, rolling 3 month averages, annualized
4.3% 4.3% 5.4% 4.4% 5.1% 4.5% 5.4% 4.0% 3.6% 4.7%
Below are the rolling 3 month, 6 month, and 12 month graphs of the core PCE (classically the Fed's favorite inflation indicator for projecting future inflation).
They all indicate that this inflation measure has been essentially stalled for 6 months to a year depending on which rolling average you look at, with upward movement at the end. At more than twice the Fed's 2% inflation target.
It all points to a Core PCE that is a bit more than double the Fed's target. Before January's number, one could argue there's been a very slow downward tilt over the last 6-8 months. With January's number, it's more like a flatlining.
Some may say that January is an anomalous "one off" on the high side. Others may say that December is an anomalous "one off" on the low side that January corrects.
There's a lot of chatter about the "no landing" scenario -- that inflation continues to stay elevated like in the graphs. I think with just a quarter percent rate hike on March 22, and another quarter point increase on May 3, that will likely continue to be the case for a long time.
GRAPHS: The "x" axis is the month of the year, where the "1" is January 2022, "12" is December 2022, and "13" is January 2023.
All of the percentage increases are annualized numbers
On the rolling 3 month one can say its been flatlined since April 2022 at around 4.5%, with wiggles
The rolling 6 month - one can say its been flatlined since January 2022 at close to 5%, with wiggles
The rolling 12 month average has basically flatlined since July to about 4.7%.
I've always been a severe critic of 12 month inflation numbers when assessing RECENT or CURRENT inflation, but provide it for comparative purposes.
CORE PCE, which is shown in the above graphs: https://fred.stlouisfed.org/series/PCEPILFE
(PCE is at: https://fred.stlouisfed.org/series/PCEPI )
Percentages are calculated from the actual index numbers, not on averaging one-significant-digit numbers.
At 4.5% inflation, the value of a dollar drops to 50 cents in just 16 years.
On Friday March 31 we will see the new PCE inflation report that includes February.
Wholesale prices (the PPI) came in at just 0.2% in February (2.4% annualized) so we may see better CPI and PCE numbers in March. And maybe the banking turmoil will dampen inflation (if companies are nervous about expanding and hiring until the dust settles on the banks situation. And likewise consumer spending).
But this morning NPR was debating 0 point vs half point.
0 point argument: "Banking crisis!"
Half point argument: "Inflation!"
I 
ed and thought, "So quarter point is a compromise. Says, 'We mean business but it's not a true crisis, yet ... and we're aren't heartless, for now'."
They say that future data will determine behavior, I take them at their word.
On edit:
I like post #10, this thread. The idea that risk of bank failure might restrict credit--the goal of higher interest rates, after all--might also count as "credit" towards a rate hike.
Problem is, how *much* of a credit is unknown (to my knowledge, henceforth "TMK"
.
well, maybe 🤔
