October 10, 2023
Back to the topic of higher rates for longer, as the members of the Federal Reserve Open Market Committee keep delivering a central message to the public at large through their statements. The message is that rates are not high enough to bring inflation down to where they would like. While they also say that they are willing to wait to see what the effect is of their previous rate hikes as they make their way through the economy, it seems like they are preparing us for at least one more rate hike this year.
Certainly, the bond market seems to have heard them loud and clear, as longer-term rates keep moving up in anticipation of the Fed’s next move. Plus, while the markets are still predicting that the Fed will start lowering rates next year, the number of moves forecasted downward has been narrowed. Thus, the markets are listening to the Fed and expecting higher rates for a longer period of time. And while all of this is very logical and espoused by experts, we would like to give you one familiar warning – nobody can predict the future.
We know the Fed is comprised of expert economists, but they are no better at predicting the future than other market analysts. We have already seen signs of the economy slowing down – especially within the housing market. While there are still no signs of an impending recession, this is just a reminder that the Fed did project a recession in the latter part of this year. It did not happen. And the surprising addition of over 300,000 jobs in September adds more evidence that we are not on the verge of a recession. On the other hand, this unexpectedly strong report gives the Fed plenty of ammunition for one more increase.
Source: Origination Pro