What Does the Fed's Hawkish Pause In Raising Rates Mean?

The Weekly Recap

The Federal Reserve was kind enough not to raise rates again at their meeting this week but signaled we’ll have another rate hike before years end, Manhattan median rents remain at all time highs. On Tuesday NYC subway ridership hit a post-pandemic record of 4.1 million riders. IPO’s are booming again. Oil is predicted to hit $100 a barrel and bad news is, that the US cant find a crashed $100 million stealth jet in South Carolina, the good news is, our stealth technology is awesome.

What Does the Fed’s Hawkish Pause in Raising Rates Mean?

The Federal Reserve met again this week and after their two day meeting, came out and left rates unchanged as anticipated. The announcement also came with the acknowledgment that it has not won the inflation-fighting battle and there will probably be at least one more rate hike before years end. For those of us hoping to hear about massive rate cuts in 2024, there was nothing in Powell’s speech that outlined that we should be optimistic about that at all.

Since March of 2020, the Federal Reserve has raised rates 11 times to combat inflation even as overall economic growth and consumer spending have shown to be resilient in the face of such increases due to pent up demand from the pandemic. (In case you missed it, you can read last weeks letter that covered What is the Cost of An Interest Rate here.)

Inflation currently sits at 3.7%, way down from last years high of 9% but still not near the target rate of 2% that has been set by the Federal Reserve. Currently, we’re in a “wait and see” period where optimism has been slightly dented and rates are unlikely to fall back to pre-pandemic levels anytime soon.

Powell pointed to a few factors that are leading to uncertainty, auto worker strikes, possible government shutdown, resumption of student loan payments and rising gas prices as variables that are making it challenging to determine how they will work in stabilizing pricing and maximizing overall employment. Not all is bad as in its Summary of Economic Projections, we can expect to see at least two quarter-point rate cuts in 2024.

Market Performance

Here are how some other indexes and asset classes have performed as of this mornings opening bell.

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past week as well as newly signed contracts in Manhattan which has seen a big increase.

Mortgage Rate Update

Mortgage rates continue to linger above seven percent as the Federal Reserve paused their interest rate hikes. Given these high rates, housing demand is cooling off and now homebuilders are feeling the effect. Builder sentiment declined for the first time in several months and construction levels have dipped to a three-year low, which could have an impact on the already low housing supply.

News You Can Use

• Fed Leaves Rates Unchanged, Signals Another Hike This Year Bloomberg

• Wall Street Gearing Up for Feds ‘Hawkish Pause’ Bloomberg

• The Fed isn’t Getting the Economy it Expected Wall Street Journal

• Citi Sees Homebuilding Investors Tuning Out Through Year-End Bloomberg

• Manhattan Median Rent Remains at Record High CNBC

• America’s Biggest Landlords Can’t Find Homes to Buy Either Wall Street Journal

• Why the Fed’s Economic Forecasts Aren’t Always for the Fed Yahoo Finance

• US National Debt Hits $33 Trillion fo the First Time CNBC

• Surging Physical oil Market Brings $100 Crude Back in Sight Bloomberg

• ARM IPO Excites Wall Street, but Challenges Loom Wall Street Journal

• IPO Roller Coaster Continues Forbes

• Goldman Raises Brent Oil Forecast to $100 Yahoo Finance

• Why Some Economists Still Think a Recession is Coming Axios

• How Rising Gas Prices Could Help the Fed Fight Inflation Yahoo Finance

The Deep Insight

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