Main Topic: Federal Reserve officials express concern about inflation and suggest more rate hikes may be necessary.
Key Points:
1. Inflation remains above the Committee's goal, and most participants see significant upside risks to inflation.
2. The recent rate hike brought the federal funds rate to its highest level in over 22 years.
3. There is uncertainty about the future direction of policy, with some members suggesting further rate hikes and others cautious about the impact on the economy.
### Summary
- European stocks rebound after a drop last week, while bond yields rise ahead of the Fed's Jackson Hole event.
- China's smaller-than-expected rate cuts and weak economic data disappointed investors.
### Facts
- đ European stocks edge higher after last week's rout.
- đ China stocks hit a 9-month low as rate easing underwhelms.
- China's central bank trims its one-year lending rate by 10 basis points, while leaving its five-year rate unchanged.
- Expectation remains for further stimulus from China.
- Asian shares decline due to disappointment, with Chinese blue chips falling to a nine-month low.
- Energy companies outperform as oil prices rise.
- Oil prices edge higher after a seven-week winning streak.
- Bond market sell-off leads to higher government borrowing costs.
- U.S. Treasury yields continue to rise, with the 30-year yield touching a fresh 12-year high.
- The U.S. Federal Reserve's Jackson Hole conference is the key event for the week.
- Markets anticipate that Fed Chair Jerome Powell will address rising yields and strong economic data.
- Polls indicate that a majority of analysts believe the Fed is done hiking rates.
- Traders bet on a just under 40% chance of a final Fed hike by November.
- U.S. dollar trades flat after five weeks of gains.
- Gold prices affected negatively by the rise of the dollar and yields.
- Prices for liquefied natural gas (LNG) supported by a potential strike at Australian offshore facilities.
- Dutch payments processor Adyen's shares drop amid concerns over weak earnings.
- Earnings from Nvidia will be closely watched.
Note: The given content contains parts that do not match the provided date range.
The majority of economists polled by Reuters predict that the U.S. Federal Reserve will not raise interest rates again, and they expect the central bank to wait until at least the end of March before cutting them, as the probability of a recession within a year falls to its lowest level since September 2022.
The minutes of the Federal Reserve meeting suggest that another rate hike in 2023 is possible, although the Fed does not mention lowering rates and intends to balance the risk of overtightening policy against the cost of insufficient tightening; the market is less inclined to believe that rate hikes will occur as predicted by the Fed, with a higher chance of rates staying steady in September and a lower chance of a hike in November.
Despite recent market gains, investors are concerned that the current rally may be the last hurrah before an economic contraction, especially after the Federal Reserve indicated that it could hike interest rates twice more this year.
Two Federal Reserve officials suggest that interest-rate increases may be coming to an end, but one of them believes that further hikes may still be necessary depending on inflation trends.
Two Federal Reserve officials, Boston Fed President Susan Collins and Philadelphia Fed President Patrick Harker, suggested that the Fed may be nearing the end of interest rate increases, although Collins did not rule out the possibility of further hikes if inflation doesn't decline.
Federal Reserve Chairman Jerome Powell signaled at a conference of central bankers that more rate hikes could be on the way as the economy continues to run hot, despite a series of policy tightening measures, in an effort to combat persistent inflation.
Investors have been building up bets on the Federal Reserve announcing an end to its rate hikes, but the central bank's preferred inflation data and Chair Jerome Powell's comments suggest that the cycle may not be over yet.
The number of job vacancies in the US dropped in July, indicating a cooling labor market that could alleviate inflation, while fewer Americans quit their jobs and consumer confidence in the economy decreased, potentially impacting consumer spending; these trends may lead the Federal Reserve to delay a rate hike in September.
The Federal Reserve meeting in September may hold the key to the end of the tightening cycle, as markets anticipate a rate hike in November, aligning with the Fed's thinking on its peak rate. However, disagreement among Fed policymakers regarding the strength of the economy and inflation raises questions about the clarity and certainty of the Fed's guidance. Market skeptics remain uncertain about the possibility of a "soft landing," with sustained economic expansion following a period of tightening.
The US economy is facing a looming recession, with weakness in certain sectors, but investors should not expect a significant number of interest-rate cuts next year, according to Liz Ann Sonders, the chief investment strategist at Charles Schwab. She points out that leading indicators have severely deteriorated, indicating trouble ahead, and predicts a full-blown recession as the most likely outcome. Despite this, the stock market has been defying rate increases and performing well.
The Wall Street Journal reports a notable shift in the stance of Federal Reserve officials regarding interest rates, with some officials now seeing risks as more balanced due to easing inflation and a less overheated labor market, which could impact the timing of future rate hikes. In other news, consumer credit growth slows in July, China and Japan reduce holdings of U.S. Treasury securities to record lows, and Russia's annual inflation rate reached 5.2% in August 2023.
The Federal Reserve is expected to keep its benchmark overnight interest rate unchanged and delay any rate cuts until at least 2024, according to a Reuters poll of economists, despite some suggesting that another rate hike might be needed to address inflation.
The Federal Reserve is expected to maintain one more rate hike on the table in their updated forecasts, despite their growing faith in the prospect of an economic soft-landing.
The stock market is currently stagnant and the key question is when the Federal Reserve will start cutting interest rates, as the market struggles when the Fed tightens monetary policy.
Following the European Central Bank's record high interest rate hike to 4%, there is speculation about how long rates will remain at this level, with analysts predicting a 12-month pause before any cuts are made, while also considering the impact of rising oil prices on inflation expectations in Europe and the US. The Federal Reserve is expected to hold rates steady in September, but there are divided opinions on whether another hike will be delivered this year, with markets anticipating rate cuts in 2024. Similarly, the Bank of England is anticipated to make one final hike in September as it assesses inflation and economic indicators.
The Federal Reserve is expected to signal that another rate hike may be necessary due to strong economic growth and inflation metrics, creating a difference of opinion between the equity and bond markets.
The Federal Reserve is expected to announce a pause on interest rate hikes due to positive economic indicators and the likelihood of a "soft landing" for the economy, but future decisions will be influenced by factors such as the resumption of student loan payments and a potential government shutdown.
The Federal Reserve's upcoming meeting will focus on the central bank's expectations for key indicators such as interest rates, GDP, inflation, and unemployment, while many economists believe that the Fed may signal a pause in its rate-hiking cycle but maintain the possibility of future rate increases.
Federal Reserve officials are expected to leave interest rates unchanged at their meeting, but investors will be focused on whether there will be another rate increase before the end of the year.
The Federal Reserve plans to continue reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities, which will have an impact on stock markets, while keeping interest rates at current levels due to the lagged effect of monetary policy and the need for the commercial real estate market to adjust; however, there are concerns about the impact of tighter credit conditions on hiring and an increase in strikes, particularly in the auto industry. Elevated interest rates will pressure dividend-income investors and affect Real Estate Investment Trusts (REITs), while the reduction of securities by the Fed may lead to a decline in stock indices. The Fed is considering raising rates in November or December but is uncertain about how long rates will remain at current levels. The core personal consumption expenditure is falling, and rising energy prices are increasing overall inflation, but the Fed is excluding energy prices due to volatility and suggests that high oil prices may impact its stance in the future. Stock market traders have a short-term time frame and may find instruments like Instacart (CART) and Arm (ARM) more suitable, while long-term investors should prepare for the market adjusting to the Fed's restrictive policy by moving capital gains into money market funds, considering energy stocks at lower prices, and being cautious of high-flying technology stocks and IPOs.
The Federal Reserve has left interest rates unchanged but indicated the possibility of one more rate hike, causing U.S. markets to slump and Treasury yields to rise, while European markets saw gains; Instacart shares sank, Klaviyo shares jumped, and Arm shares continued to slide; UK inflation for August was lower than expected, throwing the Bank of England's next move into question; Goldman Sachs has raised its 12-month oil price forecast to $100 per barrel.
The Federal Reserve has paused raising interest rates and projects that the US will not experience a recession until at least 2027, citing improvement in the economy and a "very smooth landing," though there are still potential risks such as surging oil prices, an auto worker strike, and the threat of a government shutdown.
Central banks around the world may have reached the peak of interest rate hikes in their effort to control inflation, as data suggests that major economies have turned a corner on price rises and core inflation is declining in the US, UK, and EU. However, central banks remain cautious and warn that rates may need to remain high for a longer duration, and that oil price rallies could lead to another spike in inflation. Overall, economists believe that the global monetary policy tightening cycle is nearing its end, with many central banks expected to cut interest rates in the coming year.
The possibility of a last hike in 2023 with the pause in interest rates in September may lead to the tightening and financial conditions that were not seen earlier when the Fed was raising rates faster.
Corporate America is not being deterred by the potential for another interest rate hike from the Federal Reserve, as companies like Cisco and General Mills continue to pursue deals and investments, indicating confidence in the economy's resilience and suggesting a potential soft landing in the market.
J.P. Morgan strategists predict that the Federal Reserve will maintain higher interest rates until the third quarter of next year due to a strong economy and continued inflation, with implications for inflation, earnings, and equity valuations as well as potential impact from a government shutdown.
The Federal Reserve will continue to raise interest rates as inflation resurfaces, according to Wall Street investor Caitlin Long, with big corporations benefiting while other sectors of the US economy are already in recession.
Billionaire investor Bill Ackman predicts that the Federal Reserve is likely done raising interest rates as the economy slows down, but warns of continuing spillover effects and expects bond yields to rise further.
Cleveland Fed President Loretta Mester believes another interest rate hike is likely, and rates could remain higher for an extended period depending on the strength of the US economy, with the focus shifting to how long rates will be held at current levels.
Investors are awaiting the jobs report to determine the Federal Reserve's next move on interest rates, with wage growth and revisions to previous monthly totals being key factors to watch, amidst indications that the economy is less sensitive to rising interest rates due to lower household and corporate debt levels.
The Federal Reserve is facing a tough decision on interest rates as some officials believe further rate increases are necessary to combat inflation, while others argue that the current rate tightening will continue to ease rising prices; however, the recent sell-off in government bonds could have a cooling effect on the economy, which may influence the Fed's decision.
Minutes from the Federal Reserve's September meeting may disappoint investors hoping for a shift in the central bank's hawkish monetary policy stance, as Treasury yields have already risen and some officials suggest less need for another rate hike in the current cycle.
Wall Street and policymakers at the Federal Reserve are optimistic that the rise in long-term Treasury yields could put an end to historic interest rate hikes meant to curb inflation, with financial markets now seeing a nearly 90% chance that the US central bank will keep rates unchanged at its next policy meeting on October 31 through November 1.
Investors are closely monitoring the bond market and September CPI data to determine the Fed's stance on interest rates, with Seema Shah of Principal Asset Management highlighting the circular nature of market reactions to yield spikes and their subsequent declines. She suggests that while there are concerns about upward momentum, the equity market will find comfort in a continued drop in yields and could remain range-bound for the rest of the year. Diversification is recommended as the market narrative remains unclear, and investors may consider waiting until early 2024 for greater clarity on the economy and the Fed's actions.
Investors are betting that the Federal Reserve may not raise interest rates again due to recent market moves that are expected to cool economic growth.
Markets are increasingly expecting a Fed pause in interest rate hikes, with the chance of a rate increase in November dropping to 15.8%, down from 23.1% a week ago and 38.4% a month ago, as volatile Treasury yields play a major role in shaping market expectations.
The U.S. stock market is currently trading at a discount to fair value, and Morningstar expects rates to come down faster due to optimism on inflation; strong growth is projected in Q3, but the economy may slow down in Q4, and inflation is expected to fall in 2023 and reach the Fed's 2% target in 2024. The report also provides outlooks for various sectors, including technology, energy, and utilities, and highlights some top stock picks. The fixed-income outlook suggests that while interest rates may rise in the short term, rates are expected to come down over time, making it a good time for longer-term fixed-income investments. The corporate bond market has outperformed this year, and although bankruptcies and downgrades may increase, investors are still being adequately compensated for the risks.
The Federal Reserve officials were uncertain about the future of the economy and decided to proceed with caution in their interest-rate policy, weighing the risks of overtightening versus insufficient tightening. They were divided on the frequency of rate hikes, with a majority supporting one more increase, but some feeling that the policy rate was nearing its peak. The recent spike in long-term bond rates has led to speculation that the Fed may not raise rates again this cycle.
The Federal Reserve may be finished with its program of rate hikes as market moves are now helping to tame inflation on their own.
The Federal Reserve will continue with its 'higher-for-longer' interest rate narrative unless there are signs of a slowdown in the consumer sector.
Federal Reserve officials are expected to pause on raising interest rates at their next meeting due to recent increases in bond yields, but they are not ruling out future rate increases as economic data continues to show a strong economy and potential inflation risks. The Fed is cautious about signaling an end to further tightening and is focused on balancing the risk of overshooting inflation targets with the need to avoid a recession. The recent surge in bond yields may provide some restraint on the economy, but policymakers are closely monitoring financial conditions and inflation expectations.
The Federal Reserve is expected to lower interest rates by the end of 2024, but the decline will be mild and likely to occur in the second half of the year, with the possibility of one more rate increase in 2023, according to policymakers and markets. The forecast for rate cuts is not as significant as the rate increases seen in previous years, with a projected decline of 1% in the Fed funds rate by the end of 2024. The Fed's own projections indicate short-term rates around 5% at the end of 2024, suggesting a slower trajectory for rate declines compared to market expectations. The Fed has scheduled eight meetings in 2024 to set the Fed funds rate, with the potential for rate cuts starting in June or later. The decision to lower rates may not happen until the summer of 2024, as the Fed has emphasized that it plans to cut rates gradually rather than making immediate cuts. The outlook for rates is based on the expectation that inflation will take more time to reach the Fed's target of 2% and that unemployment will increase slightly. The main risk to the rate outlook is a more severe recession in 2024, but the Fed's current focus is on addressing inflation. Recent data for 2023 has been positive, indicating that the economy may have avoided a recession. Overall, while interest rates are expected to decline in 2024, the decrease will be modest and delayed.
Federal Reserve Chair Jerome Powell's upcoming remarks at the Economic Club of New York may provide insight into the central bank's strategy on interest rates, potentially affecting the market and indicating if the Fed agrees with recent speakers who believe rate hikes are over.
