12/16 – Weekly Economic Highlights
As expected at the December 14th meeting, the Federal Open Market Committee (FOMC) raised the fed funds target rate by 50 basis points to a range of 4.25 – 4.50%, in a downshift from four consecutive 75 basis point hikes. The decision was unanimous, and there was no change to the November statement. The sentiment was hawkish, indicating that “ongoing increases” in the fed funds rate are likely appropriate and citing continued labor market imbalances.
12/09 – Weekly Economic Highlights
Economic data releases were light and bond yields remained volatile this week as market participants positioned their portfolios ahead of next week’s Federal Open Market Committee’s (FOMC) two-day meeting starting next week on December 13th. We believe the FOMC is likely to increase the federal funds rate 0.50% at its December meeting, lifting the target range to 4.25%-4.50%.
12/02 – Weekly Economic Highlights
The market received key updates on the state of the US economy this week; the November employment report was released this morning and indicated that the US economy added 263,000 jobs last month, exceeding the consensus estimate from economists of 200,000. Gains were broad-based across a number of industries, with leisure and hospitality leading the job growth, followed by health care and government (mostly local government), respectively. The unemployment rate was unchanged at 3.7% and the underemployment rate eased to 6.7% in November. A point of interest in the report was the unexpectedly high average hourly earnings jump of 0.6% month-over-month, and 5.1% over the last year, which might have received a boost from severance packages resulting from recent layoffs.
11/23 – Weekly Economic Highlights
Inflation continues to run well above the Fed’s longer-run target of around 2.0%. The Consumer Price Index (CPI) was up 7.0% year-over-year in December, versus up 6.8% year-over-year in November. Core CPI (CPI less food and energy) was up 5.5% year-over-year in December, versus up 4.9% in November.
11/18 – Weekly Economic Highlights
Recent inflation data releases from both the Consumer Price Index (CPI) and Producer Price Index (PPI) have been constructive for market participants, supporting asset prices and adjusting expectations for the future path of monetary policy. Last Thursday, November 10th, CPI was released, and both the headline and core numbers came in moderately below consensus expectations, pushing down the y/y year numbers for both headline and core CPI. The October y/y headline number was 7.7% versus 8.2% y/y in the prior month, and 6.3% y/y for the core number, versus 6.6% in the prior month. The trends in CPI inflation are poised to continue to improve as the elevated readings from November and December in 2021 roll out of the index. The PPI index was released on November 15th and the prints were also below consensus expectations on the headline and core numbers, lowering the y/y trends from the prior month. Both headline and core PPI ticked down 0.4% on a y/y basis to 8.0% and 6.7%, respectively. The PPI, consistent with the CPI, is also poised to benefit from high monthly readings of the prior year rolling out of the index in coming months.
11/04 – Weekly Economic Highlights
As expected at the November 2nd meeting, the Federal Open Market Committee (FOMC) raised the fed funds target rate by 75 basis points for the fourth consecutive time to a range of 3.75 – 4.00%, the highest level since 2008. The statement was initially perceived by the market as dovish, with the possibility of slowing the pace of rate hikes as soon as December or February. However, as the press conference unfolded, a more hawkish tone became evident. Fed Chair Powell indicated that the Fed has “a ways to go” with rate hikes to combat persistently high inflation, and that it is “premature to be thinking about” pausing. He reiterated that the risks of pausing too soon outweigh the risks of slower economic growth. He commented that rates would likely reach higher levels than projected and that policy would need to remain restrictive for some time. The Fed acknowledged the cumulative tightening of monetary policy and the lag in its effects on inflation and the economy. There was no change to the pace of balance sheet reduction, which is expected to continue at a pace of approximately $95 billion per month.
10/28 – Weekly Economic Highlights
Financial markets remain volatile as inflation data continues to point toward further increases in interest rates by global central banks. This week, companies continued to report third quarter results with several firms reporting positive earnings surprises. However, on a year-over-year basis, companies in the S&P 500 are reporting their lowest earnings growth since the third quarter of 2020. The effects of higher inflation are apparent in overall corporate profits thus far.
10/21 – Weekly Economic Highlights
At the top of global news this week, the United Kingdom’s Prime Minister Liz Truss announced her resignation as the rapidly expanding chaos surrounding her government proved too much of a burden to effectively lead the UK out of the political and financial morass in which it finds itself. Following credibility-sapping U-turns on September’s mini-budget, enforced cabinet reshuffles, and plunging personal and party opinion poll readings, Thursday’s statement of resignation came as little surprise to financial markets. Initial reaction to the news was mildly positive with gilt yields slightly lower and the pound a little firmer. Key for financial markets is whether Conservative MPs can unite sufficiently to agree on a new leader and provide some stabilization for the world’s sixth largest economy.
10/14 – Weekly Economic Highlights
Market volatility intensified this week as global central banks acted to maintain financial stability. The Bank of England intervened to avoid a crash in the gilt market following the surge in bond yields triggered by the government’s proposed unfunded tax cuts. The central bank suspended quantitative tightening and instead pledged unlimited purchases of long-dated bonds to restore market functioning and reduce credit contagion risks. Yields fell dramatically across the curve in the US and UK bond markets. This followed the Japanese government’s intervention last week, with purchases of yen in an effort to support the exchange rate while the central bank maintained ultra-low interest rates.
10/7 – Weekly Economic Highlights
Market volatility intensified this week as global central banks acted to maintain financial stability. The Bank of England intervened to avoid a crash in the gilt market following the surge in bond yields triggered by the government’s proposed unfunded tax cuts. The central bank suspended quantitative tightening and instead pledged unlimited purchases of long-dated bonds to restore market functioning and reduce credit contagion risks. Yields fell dramatically across the curve in the US and UK bond markets. This followed the Japanese government’s intervention last week, with purchases of yen in an effort to support the exchange rate while the central bank maintained ultra-low interest rates.