Latest Inflation Numbers and Discussion

[audreyh1]

Another 0.75% rate hike.

A small hint of some policy adjustment:

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.

https://www.cnbc.com/id/107144892?v...RVcPAowelQYSVNGgPB4kGkouBvOTyTWlZPAtowJ6xLPIw

 

[Born2Fish]

Another 0.75% rate hike.

A small hint of some policy adjustment:

https://www.cnbc.com/id/107144892?v...RVcPAowelQYSVNGgPB4kGkouBvOTyTWlZPAtowJ6xLPIw

I watched the presentation.

The Fed made it clear that to err on the side of TOO MUCH rate increase was far more favorable that to pause/reduce the size of the rate increase and allow the inflation to become more entrenched.

I was glad to hear that.

 

[audreyh1]

I watched the presentation.

The Fed made it clear that to err on the side of TOO MUCH rate increase was far more favorable that to pause/reduce the size of the rate increase and allow the inflation to become more entrenched.

I was glad to hear that.

I suppose that’s why the equity markets sold off after the press conference.

 

[NW-Bound]

The Fed just nuked the market. Heh heh heh...

What is funny is that the market initially jumped up at the start of the conference. I have no access to CNBC or TV, but saw it on my stock screen. Then, when Powell stated in no uncertain terms that "it is premature to think of stopping rate hikes", the market crumpled into a heap. Heh heh heh...

 

[ExFlyBoy5]

The Fed just nuked the market. Heh heh heh...

What is funny is that the market initially jumped up at the start of the conference. I have no access to CNBC or TV, but saw it on my stock screen. Then, when Powell stated in no uncertain terms that "it is premature to think of stopping rate hikes", the market crumpled into a heap. Heh heh heh...

As odd as it sounds, I find none of this humorous. Not in the least.

 

[MichaelB]

Chairman Powell didn’t give a nudge and a wink when he announced that rate hike and I guess that bothered some folks.

The song of the day is Sly and the Family Stone with “I want to take you higher”

 

[ExFlyBoy5]

Chairman Powell didn’t give a nudge and a wink when he announced that rate hike and I guess that bothered some folks.

The hike has been advertised for at least a couple of weeks, so no one should be too surprised. Then again, I am not sure many people are paying attention.

 

[NW-Bound]

No, people knew the hike was coming.

What they expected was some soothing words from Powell, saying he would be more lenient after this hike. No more spanking.

Nope. He threw away the punch bowl. No more partying!

 

[audreyh1]

The hike has been advertised for at least a couple of weeks, so no one should be too surprised. Then again, I am not sure many people are paying attention.

0.75% rate hike was totally baked in. Investors are reacting to what might happen next. Some hopes were dashed.

 

[NW-Bound]

It's obvious to me that the present situation we have with gas prices goes back to the fossil fuel companies manipulation of prices to pad their profits and of course the ever present geopolitical issues that have plagued us for decades. They like to blame not enough drilling, too many regulations, and too much focus on climate change but in reality it our dependence on fossil fuels, instead of moving more quickly to less volatile commodities such as sun and wind.

That's my opinion and I'm sticking to it. ☮

I just saw something I'd like to share.

I have a few energy stocks, but not Devon. Today, saw that it crashed -12.76%, compared to the S&P going down -2.50%. I told myself, it has got to be a bad earning report, no doubt.

Went in to take a look. No, it beat expectation on both top and bottom lines when reporting yesterday. So, what's wrong?

It is due to the company outlook. They expect to spend something like $900 million next year on capex. And this is so that they can increase output by 0 to 5%. I thought I saw that they had $1.3 billion in free cash, so a lot of it will get spent. And they are reducing dividend!

It's not as rosy as people think.

 

[Koolau]

I watched the presentation.

The Fed made it clear that to err on the side of TOO MUCH rate increase was far more favorable that to pause/reduce the size of the rate increase and allow the inflation to become more entrenched.

I was glad to hear that.

Yeah, too bad they didn't start this process a few months earlier.

 

[Koolau]

As odd as it sounds, I find none of this humorous. Not in the least.

I agree with you only because I have money in the stock market. Other than that, I think it's pretty funny - especially since (dumb as I am about such things) I saw this coming long before the FED reacted to it (I assume they saw it coming too and decided to "wait" any way.) But, again, what do I know, so YMMV.

 

[NW-Bound]

I thought the market action was funny. They were trading the market up based on just a rumor that Powell would show leniency, and when Powell said "BOO!", they pissed in their pants and panicked. "Sell, sell, sell".


PS. It makes me wonder if Powell had an aide standing in the back of the room to monitor the market, and to give him a signal of the market rallying based on misreading his intent. When he got the signal that the market was rallying, he decided to drop the bomb on them.

 

[NW-Bound]

Yeah, too bad they didn't start this process a few months earlier.

Inflation was scary enough that I think it's good that they administered bitter medicine. Better late than never.

 

[daylatedollarshort]

As long as PCE price index is still higher than the federal funds rate, The Fed will likely keep raising rates. They may pause or slow down the rate of increase, or inflation numbers may start to decline with the changes that have been made to date, but otherwise further rate increases seem likely well into 2023.

 

[JoeWras]

A wage-price spiral seems to be starting and the Fed probably won't stop until unemployment makes a move.

Supply shock started this, but it has gone on too long and the echoes of the late 70s have begun which started with the oil shock and moved into the spiral.

Hopefully it won't take an early 80s style Fed move and subsequent deep recession.

 

[Koolau]

Inflation was scary enough that I think it's good that they administered bitter medicine. Better late than never.

Yes. Inflation is much scarier than a recession. And, yes, better late than never. But, seriously, the Fed only has a couple of jobs and stable currency is the most important.

 

[jldavid47]

A wage-price spiral seems to be starting and the Fed probably won't stop until unemployment makes a move.

Supply shock started this, but it has gone on too long and the echoes of the late 70s have begun which started with the oil shock and moved into the spiral.

There was a story on the local news last night that a major interstate construction project here is likely to not be done on time because of supply chain problems and a shortage of labor. They are actually taking people off of other projects to solve the latter problem (although it will make those projects late). That doesn't solve the materials issue.

Those who have been saying that the supply side problems are easing may be technically right but practically wrong. There are still a lot of supply (both material and labor) problems in the economy. We aren't going to get significant relief from inflation until that abates.

 

[JoeWras]

There was a story on the local news last night that a major interstate construction project here is likely to not be done on time because of supply chain problems and a shortage of labor. They are actually taking people off of other projects to solve the latter problem (although it will make those projects late). That doesn't solve the materials issue.

Those who have been saying that the supply side problems are easing may be technically right but practically wrong. There are still a lot of supply (both material and labor) problems in the economy. We aren't going to get significant relief from inflation until that abates.

Well the kind of supply shock is different. The auto chips thing was due to makers knee jerk reacting and not contracting for the future, then the fabs found "new best friends" to fab out.

Here, you have the concrete mixing plant who can't get labor (unless they pay more), so concrete then is a supply issue.

It becomes a big tangled mess feeding against each other.

 

[jldavid47]

Here, you have the concrete mixing plant who can't get labor (unless they pay more), so concrete then is a supply issue.

No, that's not the issue. They cannot get enough labor on the job site itself. There may also be an issue at the concrete plant, but that's not the main labor problem.

 

[DJRR]

I thought the market action was funny. They were trading the market up based on just a rumor that Powell would show leniency, and when Powell said "BOO!", they pissed in their pants and panicked. "Sell, sell, sell".


PS. It makes me wonder if Powell had an aide standing in the back of the room to monitor the market, and to give him a signal of the market rallying based on misreading his intent. When he got the signal that the market was rallying, he decided to drop the bomb on them.

I think it was deliberate. The press release contained

" 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."

That was the good cop. The market immediately popped ~ 300 point if I remember. Then came the press conference and the bad cop. Market fell ~ 600 points. Over optimistic investors got a bloody nose. They are trying new ways to hurt the market since the subtle approach is not working and we have not even hit recession yet, forget discounting the recovery.

 

[tmm99]

I've just read in news article that Canada's top 3 grocers posted higher profits this year compared to 5-year average, and it's calling it greedflation as they are price gouging in the name of high inflation...

 

[milford]

I've just read in news article that Canada's top 3 grocers posted higher profits this year compared to 5-year average, and it's calling it greedflation as they are price gouging in the name of high inflation...

This is going to continue to happen as inflation has been baked into the economy. People expect prices to go up so companies take turn raising prices from raw materials to finished goods/services. Shortage of labor, high crude oil prices, and supply chain issues exacerbate the issue. Something in the economy has to collapse to break this cycle.

 

[ExFlyBoy5]

I thought the market action was funny. They were trading the market up based on just a rumor that Powell would show leniency, and when Powell said "BOO!", they pissed in their pants and panicked. "Sell, sell, sell".


PS. It makes me wonder if Powell had an aide standing in the back of the room to monitor the market, and to give him a signal of the market rallying based on misreading his intent. When he got the signal that the market was rallying, he decided to drop the bomb on them.

Good point. Market reaction is an interesting thing. Even more interesting is when the talking heads of the finance networks try to pin the reaction to a single thing. Of course, in yesterday's case, it was obvious.

 

[Taco]

I've just read in news article that Canada's top 3 grocers posted higher profits this year compared to 5-year average, and it's calling it greedflation as they are price gouging in the name of high inflation...

Higher profits does not equal "greedflation".

For a non-cyclical company like a grocery store, one would generally expect revenues and profits to increase every year.

If the company had profits of $100 million last year, and $102 million this year, then they do indeed have "higher profits". If inflation was 5%, then the company actually lost ground despite those higher profits. Without any other context (like margins), higher profits doesn't say much about being greedy.

This is similar to how most salaried employees generally get an annual salary increase. When they get their annual salary increase, they have "record high salaries", even though they might actually be losing purchasing power due to not keeping up with inflation.