Federal Reserve minutes show most officials see room for one more rate increase this year after September's unanimous quarter-point hike to 3.75%-4%. Many officials called it insurance against persistent inflation and committed to no set path.
Perspective Coverage
5 publishers
- Builder
- Builder 8%
- Operator
- Operator 28%
- Investor
- Investor 64%
Reality
- Evidence74
- Adoption
- Not scored
- Hype gap+5
- Incentives40
- Confidence70
The Fed took its target range to 3.75-4.00% on September 16 and raised its median PCE forecast to 3.7% in the same document, so the real cost of holding a metal that pays no coupon moved by about a sixth of a point.
Perspective Coverage
14 publishers
- Builder
- Builder 3%
- Operator
- Operator 27%
- Investor
- Investor 70%
Reality
- Evidence80
- Adoption75
- Hype gap+15
- Incentives30
- Confidence75
buildOne report1 publisher 10-year Treasury yield hits 24-year high of 5.34% before easing back
US 10-year Treasury yields hit 5.34% on 1 October, their highest in 24 years, while oil traded back above $100 a barrel. Rates and oil both reversed within days, so teams planning Q4 headcount, infrastructure or fundraising should budget both as ranges.
Reality
- Evidence55
- Adoption
- Not scored
- Hype gap+10
- Incentives
- Not scored
- Confidence50
The Conference Board's consumer confidence index fell 6.7 points to 81.9 in September, its lowest in 12 years. Jobs data out the same day held steady. The drop traces to fuel and prices, and those are what a spending forecast built on labour figures alone misses.
Reality
- Evidence70
- Adoption
- Not scored
- Hype gap+5
- Incentives
- Not scored
- Confidence65
US 10-year Treasury yields rose to 5.30% on Wednesday, their highest since 2002, even though inflation came in cooler. Whatever drove it, growth or government debt, a cash-flow model that counted on cooling inflation to lower its discount rate now needs a higher one.
Perspective Coverage
4 publishers
- Builder
- Builder 5%
- Operator
- Operator 16%
- Investor
- Investor 79%
Reality
- Evidence85
- Adoption
- Not scored
- Hype gap+10
- Incentives25
- Confidence80
Bureau of Economic Analysis revisions cut July's core-services PCE inflation by 34 basis points to 3.35%, partly via new methods for three categories. August came in at the same 3.35% on the new method, so the revision lowered the level of inflation without slowing it.
Perspective Coverage
3 publishers
- Builder
- Builder 3%
- Operator
- Operator 25%
- Investor
- Investor 72%
Reality
- Evidence62
- Adoption
- Not scored
- Hype gap+12
- Incentives45
- Confidence64
Hassett's case against another Fed hike rests on a three-month inflation window
Kevin Hassett, the White House's top economist, says three-month core inflation near 2% leaves the Fed little room to raise rates. Wednesday's August PCE release will test his window on the inflation gauge the Fed itself prefers.
Reality
- Evidence45
- Adoption
- Not scored
- Hype gap+30
- Incentives80
- Confidence50
Core services and a sudden run-up in computer prices are holding the Fed's preferred gauge 1.35 points above target. Futures put the September choice at hold or hike.
Perspective Coverage
3 publishers
- Builder
- Builder 10%
- Operator
- Operator 32%
- Investor
- Investor 58%
Reality
- Evidence78
- Adoption
- Not scored
- Hype gap+10
- Incentives
- Not scored
- Confidence74
Households pushed money-market balances to $5.1 trillion for a real yield under half a point
The Fed's Q2 accounts show household money-market holdings up 12.8% over the year to $5.1 trillion at yields below 3.75% after fees, with August CPI at 3.4% and the small-CD balances savers control flat for seven months.
Reality
- Evidence63
- Adoption78
- Hype gap+15
- Incentives32
- Confidence60
A 0.2-point revision to core PCE would still leave it 1.1 points above the Fed's target
The BEA publishes its annual national accounts revision on September 30, fourteen days after the FOMC votes, and Goldman Sachs and JPMorgan both model it taking 0.1 to 0.2 points off core inflation back to 2021.
Reality
- Evidence34
- Adoption
- Not scored
- Hype gap+31
- Incentives56
- Confidence37
Processed intermediate goods rose 11.5 percent over 12 months while the prices firms finally charge rose 5.4 percent. Diesel accounts for most of August's monthly move, and the measure that excludes distributor margins accounts for the rest.
Reality
- Evidence88
- Adoption
- Not scored
- Hype gap+18
- Incentives40
- Confidence74
August's 4.9% annualized CPI rests on one 0.40% month
Wolf Richter annualizes August's 0.40% monthly rise at 4.9% and core services at 4.0%, while the year-over-year rates for the headline index and for core services both sat where July left them, at 3.4% and 3.0%.
Reality
- Evidence62
- Adoption
- Not scored
- Hype gap+25
- Incentives45
- Confidence58
Warsh's first Jackson Hole keynote moves September hike odds to 50-60%
Headline PCE at 3.7% is the number Warsh quoted, but the six-month annualized run of 4.1% is what decides whether September is one hike or the first of several, and this chair does not plan to say in advance.
Reality
- Evidence24
- Adoption
- Not scored
- Hype gap+35
- Incentives55
- Confidence38
Waller's 3.05% inflation trend takes 13 points out of the market's hike odds
Fed funds futures went from 63% positioned for higher rates to roughly even in a single morning, and the number doing most of the work may be a Commerce Department measurement change worth 20 basis points.
Reality
- Evidence58
- Adoption52
- Hype gap+18
- Incentives62
- Confidence57
Kramer stakes a coin-flip September hike on the thin chart above current Treasury yields
July headline PCE at 3.7 per cent puts a September Fed hike near even money, and the load-bearing piece of the argument is a chart claim about how little sits above today's 2-year and 10-year yields.
Reality
- Evidence28
- Adoption
- Not scored
- Hype gap+44
- Incentives63
- Confidence33
Goldman says the market's 45% odds on a Fed hike are nearly double what the data supports
The bank's own estimate is 25%. The more useful detail is that the market's hike probability travelled from 12% to 45% on oil headlines, not on inflation prints.
Reality
- Evidence28
- Adoption
- Not scored
- Hype gap+24
- Incentives66
- Confidence33