Today is the FOMC announcement day. As expected, the Fed kept the rates unchanged at 5.25% - 5.5%. The statement looked almost exactly the same as the July one except for the three changes highlighted above. Basically, the job market is cooling down but the economy is more robust compared to July. Every three months FOMC publishes the dot plot by collecting FOMC members’ projections for future GDP growth, unemployment rates and inflation. The September dot plot continues the trend of FOMC members raising the rate projections for 2024. The median for the 2024 Fed funds rate projection was 4.1% in December 2022, 4.3% in March 2023, 4.6% in June 20223 and now 5.1% in September 2023. I feel this is some kind of boiling frog strategy. By the time people realize it, we are stuck in the 5% hot water for years and can’t escape. Businesses and individuals who have high debt load beware. Chances are things are not going to end well for the highly leveraged.
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