Once again it’s Fed Week. Wednesday Jerome Powell and the Federal Reserve will conclude their 2 day meeting, issue their interest rate decision, give prepared comments and conduct a Q & A with the press.
Since the last meeting, the MAIN topic everyone had their focus on was the Debt Ceiling, even though the Fed has no direct impact on that entire situation. Although, there is an Indirect impact in that the Fed’s voice on matters related to monetary policy, totally matters. Same goes for Treasury secretary Janet Yellen. Although serving in different capacities in different entities, their cohesion about the markets in general, government solvency, inflation, monetary policy, and the economy always have the markets ears wide open. And this week is one of those weeks.
We talked about this exact scenario in last week’s show – This is the week we get the answer about the big elephant in the room. Will the Fed pause rate hikes this meeting and then issue one in July – OR – will see a surprise rate hike now and THEN a pause in July? I personally think it’s completely up for grabs with the only difference being when the market freaks out and reacts with volatility. Arguments for both sides of this scenario have merit and valid data to support either outcome we live through in June and July. The BIGGER issue on the horizon will be WHAT HAPPENS AFTER JULY? There will be so many unanswered questions, and the Fed is going to be faced with the outcome we talked about last episode – they’re gonna take one in the chin if this all goes wrong. But even then, will they care? Right now it really doesn’t feel like it.
As for mortgage rates, they will likely be slow to start the week as everyone awaits the Fed decision and market reaction. If the Fed does decide to make a rate hike this month, then we could see mortgage rates bounce around for the following 24-48 hours, but if they pause on the rate hikes then the current 0.25% range we’re in now will be the course for the upcoming weeks that lead into the July meeting.
And here’s a quick look at what we’re watching in the markets this week:
Tuesday: Month over month, year over year, and CORE Consumer Price Index, or “CPI” These figures are likely to already be known by the Fed in advance of this weeks meeting, but will be publicized for the markets to digest and determine how to translate that into the overall goals the Fed has been touting for well over a year….2% inflation, which we’re STILL nowhere near…
Wednesday: Month over month, and CORE Producer Price Index, or “PPI” are released. For those of you new to the show, PPI measures the change in the price of finished goods and services sold buy producers, which eventually find their way into the Consumer Side of inflation, but vary based on type of products and price points. CORE PPI measures those SAME things, but excludes Food and Energy, which are considered “too volatile” despite the fact that we still end up paying market price for them.
Thursday: The markets will all be digesting the Fed’s decision, market data from earlier in the week, AND STILL hit us with a lot of really important measurements: Core Retail Sales, Empire State Manufacturing Index, Retail Sales, and Unemployment Claims.
And finally on Friday we get the University of Michigan Preliminary Consumer Sentiment. Whew what a crazy packed week this one will be. Mark this down as super important. When get to the end of the year and look back at 2023, THIS will be a week to remember.
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