December 12, 2023
Today is the last meeting of the Federal Reserve’s Open Market Committee. Well, for the year anyway. Though technically, the Fed can call an emergency session at any time if a crisis takes place. For example, the “Black Monday” stock market crash of October of 1987. There were emergency rate cuts in response to the Financial Crisis of 2008 and more recently during the pandemic. We are expecting no such emergencies to happen for the remainder of the year, but emergencies are not usually anticipated ahead of time.
Thankfully, most market analysts are expecting no action on rates by the Fed at this meeting. If this additional month of pause comes to fruition, that means we will have had a pause from hikes for a full six months. Which brings us to the definition of the phrase “higher for longer.” Because inflation was acting stubbornly, the Fed declared that we could expect rates to stay higher for longer. We wonder just how long that is. Could the pause last for a year before the Fed cuts rates? Or could the first rate cut come before or after that time?
We must watch the data on inflation and economic growth carefully to answer this question. Friday, we received data showing the job market continues to be strong. We had some good inflation news last month and the Consumer Price Index for November is due to be released today. You can be sure the Fed will take note of this number during their meeting today. We should note that the Fed has not ruled out at least one more rate increase if the numbers start moving the wrong way. If we get another month of good inflation news, that should be enough to keep the Fed from their itchy trigger finger as they wait things out.
Source: Origination pro
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