Monetary policy in the United States comprises the Federal Reserve's actions and communications to promote maximum employment, stable prices, and moderate long-term interest rates--the economic goals the Congress has instructed the Federal Reserve to pursue.
Photo Source: BOARD OF GOVERNORS of the FEDERAL RESERVE SYSTEM
The FOMC raised rates by 25 basis points but gave no indication of its intentions for the September meeting.
Powell stated that the FOMC has not decided to hike rates every other meeting and will instead take it meeting by meeting.
He likely intended to avoid prejudging a committee decision, not to indicate a shift away from his previously stated preference for a "careful pace" of tightening in the future.
The July 2023 hike will likely be the last of the cycle.
Powell said that the FOMC will be mainly focused on the inflation data, and we expect the next few CPI reports to be soft. So, the FOMC will most likely skip September to slow the pace and conclude in November that inflation has slowed enough to make a final hike unnecessary.
A more observations from Powell’s comments:
- He did not sound concerned about the recent decline in bank lending or the tightening of bank lending standards.
- He mentioned the Fed staff no longer expects a recession.
- He clarified that in the future, the FOMC could continue QT even while cutting the funds rate.
The Fed is done.
Mike Shell is the founder, President, and Chief Investment Officer of Shell Capital Management, LLC, and the portfolio manager of Asymmetry® Managed Portfolios. Shell Capital Management, LLC is a registered investment advisor focused on asymmetric risk-reward and absolute return strategies. Shell Capital provides investment advice and portfolio management to clients with separate accounts at Goldman Sachs Advisor Solutions with an investment management agreement. The observations shared on this website are for general information only and should not be construed as investment advice to buy or sell any security. This information does not suggest in any way that any graph, chart, or formula offered can solely guide an investor as to which securities to buy or sell, or when to buy or sell them. Securities reflected are not intended to represent any client holdings or recommendations made by the firm. In the event any past specific recommendations are referred to inadvertently, a list of all recommendations made by the company within at least the prior one-year period may be furnished upon request. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on the list. Any opinions expressed may change as subsequent conditions change. Please do not make any investment decisions based on such information, as it is not individualized advice and is subject to change without notice. Investing involves risk, including the potential loss of principal an investor must be willing to bear. Past performance is no guarantee of future results. All information and data are deemed reliable but are not guaranteed and should be independently verified. The presence of this website on the Internet shall in no direct or indirect way raise an implication that Shell Capital Management, LLC is offering to sell or soliciting to sell advisory services to residents of any state in which the firm is not registered as an investment advisor. If this website contains information regarding Options Trading, please read the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD). Options involve risk and are not suitable for all investors. The views and opinions expressed in Asymmetry® Observations and Asymmetric Investment Returns are those of the authors and do not necessarily reflect the position of Shell Capital Management, LLC. The use of this website is subject to its terms and conditions.