Fed Unfiltered, Weekly Report: 11/7/22

FOMC – A Higher End Point & a Narrow Path to a Soft Landing

• The Fed increased Fed Funds another 75bps last week.
• In the post meeting press conference, Powell talked about a new terminal rate, “higher than previously expected” and the challenge of a soft landing as high inflation continues, “we have to have policy be more restrictive and that narrows the path to a soft landing.”
  • A soft landing would be – continued growth (most analysts are expecting GDP to be 1.0% or less in 2023), higher unemployment (the natural rate is currently 4.4%) and inflation decreasing MoM for “some time”.
  • The Fed’s current forecast for the terminal rate or end point for this rate hike cycle is 4.6% (September’s SEP).
• The Fed’s blackout ended last Thursday – on Friday five Fed officials either gave a speech or were interviewed, shedding some light on the new terminal rate and what the upcoming pace of rate hikes might look like (see commentary in report).