11/2/2022: Fed Raises Rates by Another 0.75%

The ultimate level of interest rates will be higher than previously expected.

The Fed announced another 0.75% rate increase after the FOMC meeting. There’s no surprise at all. If you compare today’s FOMC statement to September’s, the only difference is the following sentences:

The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

In the press conference, the Fed Chair JeromePowell doubled down by saying:

The incoming data since our last meeting suggests the ultimate level of interest rates will be higher than previously expected

and

The risks are asymmetric. If the Fed does too much, it can cut. If it doesn’t tighten enough, then you’re in real trouble.

Basically, the Fed plans to hike the interest rate higher than the 4.375-4.875% range projected during the September meeting. The stock markets tanked. Dow was down 500 points and SPY 0.00 ticked down 2.5%. It’s basically a replay from the September meeting. But I am hardly surprised. I am waiting for super juicy yields from treasury bonds in the coming months.