NO Clarity from Fed Members…They’re ALL GUESSING!

As we expected, last weeks inflation and housing data would be center stage as everyone anxiously awaited the results of our progress, or lack there of, against inflation. And with CPI and PPI data coming it right about where it was projected to – we learned that inflation is still healthfully in the positive. And to add insult to injury, unemployment isn’t heading up as fast as the Fed needs it to, which sets in motion another round of guess work heading through the month of August.

Look no further than that these 2 Fed members had to say last week:

Federal Reserve Bank of Philadelphia President Patrick Harker said the US central bank may be able to cease interest-rate increases, barring any surprises in the economy, though rates would need to stay at their current elevated levels for some time ß So how long will that be anyways….no timeframe means it’s not safe enough to even guess…and THAT should tell you something.

“Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work,”

Speaking elsewhere on Tuesday, Richmond Fed President Thomas Barkin argued it was too soon to say whether another rate increase at the Fed’s next meeting in September would be appropriate ß Well ya…you all said you’re gonna remain data dependent, and you DEFINITELY need more data, cause this week’s info ain’t gonna cut it.

“I’m leaning toward waiting until September to decide. We’ll get two labor reports and two inflation reports. I don’t see any reason to pre-judge. Should we be at that point where we can hold steady, we will need to be there for a while,” Harker said in his speech. “I do not foresee any likely circumstance for an immediate easing of the policy rate.”

So with that, let’s take a quick look at what’s coming up in the markets this week. We only get pertinent data on 3 days this week starting off with

Tuesday:  Core Retail Sales, Empire State Manufacturing Index, Retail sales Month over month

Wednesday: Is a really important day for mortgage and real estate when we get Building permits, housing starts, and the FOMC Meeting Minutes. We’re hoping for no big surprises here, but like we have warned before…when the Fed releases their minutes, trust that all interested parties are going to scour through those notes for ANY hints of what could be coming next. If there’s nothing tipping off what the Fed will do next, then any hype about these notes coming out will be all for naught.

Thursday: Unemployment claims comes out which everyone will be looking at since jobs data is a key factor the Fed is data dependent on, in order to make their next rate hike, or rate pause decision. And also Thursday is a report we don’t often talk about on this show, called the Philly Fed Manufacturing Index. And the reason we’re bringing it up this week is because if it brings a negative print this month, it will mark the 12th consecutive month in negative territory. You heard that right, this index has had a  negative reading EVERY MONTH since September 2022. Every month since then was projected to be negative and has been reported out as negative. This is a Survey of about 250 manufacturers in the Philadelphia Federal Reserve district and asks respondents to rate the relative level of general business conditions.  Anything above 0 indicates improving conditions, and anything below 0 indicates worsening conditions. This week’s reading is expected to be -13.5….Whiiiiiiiiich is also what last months ACTUAL reported reading was. Although this is only a microcosm of ALL manufacturing conducted in our nation…it’s an ominous sign. It may not make the top of the headlines in the news, but pay attention to what this means if this losing streak continues for even longer.  Quick historical footnote, I went back as far as I could in preparation for today’s show….and going back all the way to 2010, in the past 12.5 years there’s never been more than ­­­5 consecutive months of negative readings, which happened back in 2012…and even during the Spring & summer of 2020…the worst it got was 3 consecutive monthly negative readings….Three.

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