From the Desk of Kevin Hodson

On the Desk

The Federal Reserve just concluded their most recent Federal Open Market Committee (FOMC) meeting on 9/20.

In the post-meeting presser Wednesday afternoon, Fed Chairman Jerome Powell indicated that the Fed is “close to done raising interest rates.”

However, they’re not about to ease up on the Federal Funds Rate which presently stands at 5.25% – 5.5%.

While the central bank chose to leave rates unchanged at this meeting, 12 of 19 Fed officials said they still expect to raise rates once more this year.

This consensus is driven by the belief that maintaining higher borrowing costs for longer is necessary due to continued strength in the economy and recent resurgence in inflation, as per latest Consumer Price Index (CPI) report.

The CPI rose 0.6% in August, its biggest monthly gain of 2023. Year over year, the cost of goods and services rose 3.7%.

While 2023 has largely seen inflation figures fall, August numbers amounted to biggest monthly increase this year, as consumers faced higher prices on energy and a variety of other items.

Energy prices fed much of the gain, rising 5.6% on the month, an increase that included a 10.6% surge in gasoline.

The FOMC will convene two more times this year: the first week of November and then again in mid-December.

Additionally, the Fed sees fewer rate cuts than previously anticipated in 2024, in part due to a stronger labor market than what was once expected.

Inflation projections indicate that the Fed believes core inflation will fall below three percent next year and return to their two percent target by 2026.

The Fed has adopted a “higher for longer” mindset, with expectations that their benchmark ratewill be at 5.1% by the end of 2024, up from 4.6% in the last projection round in June.

While Powell noted that “a soft landing is our primary objective,” he also acknowledged that the scenario was not yet guaranteed, nor even the Fed’s baseline expectation, and “proceed[ing] carefully” was still the order of the day.

“Ultimately, this may be decided by factors that are outside our control,” Powell said.

Off the Desk

My life outside the financial markets is dominated by two things: my daughter’s softball obsession and our dog, Harley. She (my daughter) is a pitcher in two leagues and is always in motion. It never really ends—for her or for me. Harley, our four-legged mascot and the honorary Mayor of Softball, also gets to plenty of games with us.

The pace of the fall will continue to be hectic, and we look forward to the victories and hard-fought lessons along the way.

As always, we’ll keep you up to date on our market insights and encourage you to reach out with any questions. Look forward to talking with you again soon.