Payne's Perspective: November 7, 2022: Keeping It Real
It’s not a surprise the big market news of the week came from the Federal Reserve, but what was somewhat surprising is how upset Jay Powell appeared in the question-and-answer period after the Federal Open Market Committee (FOMC) wrapped up with another 75-basis points (bps) rate hike.
The official statement mentioned the lagging effects of rate hikes and hinted at how dangerous the cumulation of rate hikes can be for the economy.
The lags refer to how long it takes for rate hikes to work through the system and begin to have real-life impacts. The same concept also applies to how these rate hikes accumulate - with rapid succession, each rate hike could have an exponentially larger, more consequential effect on the economy.
Red Letter Day
When the FOMC statement was released, the market spurted higher as it seemed like the logical language associated with a so-called ‘step-down’ where future rate hikes would be smaller.
There is speculation Powell okayed the new language to appease a large contingent of the FOMC including, Lael Brainard.
To read the full report contact your account executive or email Research@wstreet.com.
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