It’s Fed day. There is an 80% probability that the FOMC will raise their target overnight rate by 1/2%, and a 20% chance that it will be hiked 3/4%. Remember that this is only the overnight rate that gets bumped. All other rates, from the 1 week treasury to the 30 year notes are all driven by the demands of the market. Interestingly enough, long term rates like mortgages have gone lower over the last few weeks despite widespread understanding that the hike will be happening today.
The hike today will accomplish a few things. It sends the message that the Fed is serious about fighting inflation, and higher rates will make conducting business and speculation more expensive, which ironically will help drive prices down eventually. It also gives the FOMC further cushion for next year when they begin lowering their rate again.
Inflationary indicators have turned a corner and are heading south, but are still 2X-3X the 2%-3% YOY target that has been deemed “healthy and sustainable” by the collective brain trust that deliberates policy and has the power to do something about it.
Oh, and the photo of the house? it’s where Jerome Powell lives. So if you’ve got something to say and find yourself in Chevy Chase, Maryland, this is where you’ll find him. Feel free to help yourself to a complimentary newspaper on the lawn. Evidently he doesn’t read them anymore. 😂