Excuse the break in the sci-fi themed FOMC notes this July in favor of another favorite. And remember, the great game is terrifying.
- The Federal Reserve raised its target for overnight interest rates by 0.75% to a range of 2.25 – 2.50%, the second consecutive 75bps hike
- Economic data since the Fed last met have been complicated, as inflation is high today, but there are leading indications it will slow
- The FOMC statement was little changed—no immediate Fed pivot—though the August Jackson Hole conference would be better timed for action
- Market reaction to the release was muted, with equities a touch weaker, the U.S. dollar a touch lower, and yields within 1bps of unchanged
Tyrion Lannister might have been referring to the quest for the iron throne, but in this context, the quest is for timing the Fed pivot. Nearly all major financial markets are cueing off that one theme. Today, however, the FOMC elected to raise its target for overnight interest rates by 0.75% to 2.25-2.50%, marking the fourth hike this year, which have so far totaled 225bps. You have to go back to 1981 to find a period with a faster of a tightening, when Aegon Volcker rode his dragons from policy Valyria to conquer inflation and usher in the longest period of inflationary peace this nation has seen. Of course, there was the small issue of a recession with which to deal. That’s where the Powell Fed hopes—quite optimistically—to do better.