Fed minutes: 'Ongoing' rate hikes needed, 2 officials wanted 50-point hike

[progree]

Last edited Wed Feb 22, 2023, 06:06 PM - Edit history (1)

Yahoo Finance, 2/22/23

This is in regard to the January 31 - February 1 Federal Open Market Committee (FOMC) meeting, whose meeting minutes came out today, Feb 22. These are the people that vote on interest rate hikes

https://finance.yahoo.com/news/fed-minutes-ongoing-rate-hikes-needed-2-officials-wanted-50-point-hike-195355428.html

There's no sign of a coming pause at the Federal Reserve.

Instead, officials appeared to remain steadfast in their commitment to raising interest rates to beat inflation, according to minutes from the central bank's latest policy meeting released Wednesday.

Fed officials felt inflation is still “unacceptably high” and that while inflation data received over the past three months showed a welcome drop in the pace of monthly price increases, officials felt that substantially more evidence of progress across a broader range of prices would be required to be confident that inflation was coming down.

The minutes also said that "a few" participants favored raising the federal funds rate by 50 basis points at the Feb. 1 policy meeting, noting that a larger increase would more quickly bring the target range close to the levels they believed would achieve a sufficiently restrictive stance.

Still, several participants noted the possibility that as consumers become more price sensitive, businesses might accept lower profit margins in an effort to maintain market share, which could reduce inflation temporarily. And nearly all members favored slowing the pace of rate hikes to evaluate the impact that existing hikes have had on the economy.

And that was back when inflation looked like it was on a definite cool-down trend (I thought so too back then).

This January 31 - February 1 FOMC meeting (discussed above whose minutes came out today) was before:

* the very hot jobs report that came out February 3 with 517,000 new payroll jobs

* the hot CPI and PPI (wholesale prices) inflation reports below that came out in mid February

* the 3% (in just one month) retail sales sales increase in January (the report came out February 15).

Lately, particulary since the mid-February CPI and PPI and retail sales reports, all I have been reading are bullish (meaning pushing for larger interest rate increases) from various members of the Federal Open Market Committee (FOMC) that vote on rate hikes,

As for the meme that interest rate rises won't affect the current inflation, because it's is a global phenomenon caused by supply chain disruptions, Ukraine/Russia, etc., that may be true, but I should note that none of the FOMC or other Federal Reserve people talk that way, and neither, FWIW, does anyone in the administration that I've heard of. Paul Volcker would also disagree (however, the price we paid was a double-dip recession). As for globally, other central banks (except Turkey) have been pushing up their interest rates too.

So expect at least a 0.5% rate increase at the next FOMC meeting March 21-22. Don't be fooled by anything "dovish" that you read in the Jan 31 - Feb 1 meeting minutes above.


On the inflation front:

3 months annualized: Core CPI: 4.58%, Core PPI: 4.63%,

I chose 3 months for its recency, but that it's still a longer period than one month, so less likely that one can dismiss it as a "one off". (The latest one-month numbers -- January numbers as reported mid-February -- aren't good either: Core CPI: 5.06%, Core PPI: 7.27%, CPI: 6.38%, PPI: 8.18% annualized rates using the actual index numbers)

I thought they were on their way down before the mid-February reports of January inflation.





More on the graphs of monthly CPI, PPI, Core CPI, PPI, and why the Fed and I think core is better for predicting future inflation
https://www.democraticunderground.com/10143034894#post1

At 4.5% inflation, the purchasing power of the dollar drops by half in just 16 years.

I'm not looking for the stock market to bail me out either - its valuations are way way high on a historic basis. That was justified back when interest rates were trivial (so there was no real competition to stocks - "TINA - There Is No Alternative" ), but not so much anymore.

[Fiendish Thingy]

1. Bonds are doing pretty well lately

A diversified portfolio is a must.

Of course, that could all change if the Republicans succeed in defaulting on the debt…

[progree]

2. A discussion of CDs and Treasuries just broke out in the Personal Finance Group

it may expand to other kinds of fixed income investments
https://www.democraticunderground.com/11214660

Of course, that could all change if the Republicans succeed in defaulting on the debt…

Yup. That will torpedo the stock market too, big time.

[peppertree]

5. And you can bet the entire GOP caucus will short-sell like there's no tomorrow

As well as their donors, of course.

Except for Paul Singer - who will just buy a billion in defaulted bonds on the Caribbean black market, and then sue for $20 billion.

He'll bribe a Trump-appointed judge, and might just get his way.

[bucolic_frolic]

3. They should just keep going, pain now, or more pain later and longer, which do you want?

[progree]

4. the other view (very widespread on DU) ...

https://www.democraticunderground.com/10143037099#post13

I'm trying to stay out of the policy discussions since I'm a and don't really know