Fed Chairman Jay Powell spoke last Friday at the Jackson Hole conference for Central Bankers. He was pretty clear that the Fed would remain vigilant in its fight against inflation.
The economy is doing better than the Fed expected,
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Last week the CPI report was released. One can see that shelter is now by far the biggest component of inflation. Non-Housing Services are growing at a moderate rate while Core Goods prices are declining.
This chart shows how CPI excluding shelter has been moderating quite significantly,
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Only Time Will Tell and Bill Ackman Battling Back
This will be a rather short blog following up on last week’s focus on key levels for the 2 and 10-year Treasury yields.
I’m a bit tired as last night (Thursday), I had a flight connection through D/FW Airport to return home to Orange County.
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Taking a Peek at a Possible 2-Year Peak?
Last week’s ADP payroll report really rocked the bond and stock markets. It was further support for the Fed to remain tighter for longer. This chart shows how strong private employment growth was.
On the other hand,
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Turning up the Heat and Icarizing the Economy
Last week was my birthday, and I chose to celebrate it by heading to my home in the desert to check out some work that had been done and to play tennis. This picture from my car dashboard shows a couple of pieces of interesting information.
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It Costs A Lot To Win and Even More To Lose
Last week I discussed how recessions have not occurred until an inverted yield curve reverts to being positively sloped such that long rates are higher than short rates. I wanted to do a bit of a deeper dive to see what it means for employment peaks.
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Fire on the Mountain: Dead Ahead for Jay Powell
Fed Chairman Jay Powell understandably garnered a lot of attention after the Fed meetings concluded last week, which resulted in the first pause in rate hikes after 10 consecutive increases. At the same time, to manage expectations, the Fed dot plot forecasts two more interest rate hikes before they’re done for this cycle.
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The Squeeze Is On
As this chart shows, the yield continues to invert with 3-month Treasury Bill yields substantially higher than 10-year Treasury Note yields.
As I wrote about previously, Fed Chairman Jay Powell discounted traditional yield curve indicators such as the differential between 10s and 3-month T Bills and 10s and 2-year Treasury yields.
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Banking on Cuts
In the short run, the Fed chose to keep up the inflation fight despite deteriorating financial stability emanating from a wounded banking sector. There is now a lot of market data corroborating that the Fed will have no choice but to start cutting rates soon.
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Who's Afraid of Treasuries? When Stability Breeds Instability
I’m going to breeze through a number of tweets and charts as I’m headed to watch the semi-finals and finals of the tennis matches at Indian Wells. The weather is going to be outstanding, and the matches have a similar promise.
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