Latest / Markets with Megan: A Quick Financial Markets Update / Why Are We Watching the Fed | S3 E161 | 08-19-26

Transcript

Why Are We Watching the Fed | S3 E161 | 08-19-26 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: We got a little bit more insight into what the Fed's thinking today.
• 0:03
  Megan Horneman: It is Wednesday, August the 19th, and this is Markets with Megan.
• 0:07
  Megan Horneman: If you like this podcast, you can subscribe to it.
• 0:09
  Megan Horneman: There's an alarm bell at the bottom that you can hit.
• 0:12
  Megan Horneman: You can share it with your friends, family members, anybody who's interested in that economic data that we get every day, what the newspapers print about, and what it really means when you dig under the surface for your investments and the economy.
• 0:25
  Megan Horneman: So let's dig right in today.
• 0:27
  Megan Horneman: We got the minutes from the Federal Reserve's July meeting.
• 0:31
  Megan Horneman: Now they always release a short statement and then the press conference after their meeting.
• 0:36
  Megan Horneman: So oftentimes these full meeting minutes don't have a lot of weight in market reaction.
• 0:41
  Megan Horneman: But we wanted to take a look at these today because remember, we had three different people that descended in favor for rate hikes last time.
• 0:49
  Megan Horneman: So we wanted to get a little bit more clarity on what the committee was actually thinking.
• 0:53
  Megan Horneman: So in this very, very long document, I'm going to highlight some of the key things that we got out of this.
• 0:58
  Megan Horneman: That on balance, the risks to the forecast for employment and real GDP were seen as skewed to the downside, but those risks on the inflation forecast were skewed to the upside.
• 1:10
  Megan Horneman: And they are concerned that inflation could be more persistent than the staff had anticipated.
• 1:16
  Megan Horneman: They even said when it came to inflation that when you exclude some of those items that are directly impacted by tariffs or the recent increase in energy prices, that underlying inflation is still a problem and is still elevated.
• 1:44
  Megan Horneman: Now, what does all of this mean?
• 1:46
  Megan Horneman: They have a general upbeat on tone on the economy at this point.
• 1:50
  Megan Horneman: Economy's holding in stable.
• 1:52
  Megan Horneman: When they talk about the labor market, they mentioned in there that the labor market remains stable in the near term and the unemployment rate's probably going to stay close to these low levels.
• 2:02
  Megan Horneman: So the only consistent thing that we keep seeing in here is those committee members being concerned about inflation.
• 2:08
  Megan Horneman: There was some hinting that maybe uh uh the chairman Walsh will want to reduce the number of meetings.
• 2:17
  Megan Horneman: I don't find this a problem.
• 2:19
  Megan Horneman: Right now, there's eight meetings.
• 2:20
  Megan Horneman: These that the Fed decided to be much more transparent after the great financial crisis to really ease some of the liquidity problems in the market.
• 2:28
  Megan Horneman: This isn't necessary anymore.
• 2:30
  Megan Horneman: And sometimes I think that markets just hold on to these Fed comments too much, and then it makes it even more difficult for the Fed members to really stand by their views, especially if things change.
• 2:40
  Megan Horneman: So I think that it's there's nothing wrong with them going from eight meetings to six meetings.
• 2:44
  Megan Horneman: This still would be plenty of meetings to get an idea of what's going on.
• 2:48
  Megan Horneman: Um, but also the fact that this set the September meeting, what does that mean for what the Fed's gonna do?
• 2:54
  Megan Horneman: They were very clear that they're concerned about inflation and they need to see it decline.
• 2:58
  Megan Horneman: We haven't seen it got much worse since we since they met, but it is and it may be getting a the readings we got were just a little bit better, but it still is very elevated.
• 3:08
  Megan Horneman: Um a couple of the committee members were in favor of raising rates already because that would avoid them having to do bigger rate increases in the future.
• 3:16
  Megan Horneman: And we've seen what that has done before.
• 3:18
  Megan Horneman: Think about 2022 when we had to have some pretty significant increases in the interest rates to get to get really when we were behind the curve on inflation, but to really try and catch up with inflation.
• 3:29
  Megan Horneman: I don't think this Fed wants to be behind the curve there.
• 3:32
  Megan Horneman: Now, markets today, the equity markets are higher.
• 3:35
  Megan Horneman: Um, the bond markets are better or higher as well.
• 3:38
  Megan Horneman: That means yields are lower.
• 3:39
  Megan Horneman: This has more to do with an announcement from the Treasury today on how they would be doubling their in their long-term bond buying holding to really try and contain that increase we've seen on the long end of the curve.
• 3:51
  Megan Horneman: This doesn't so the minutes today don't necessarily have much to do with that the rally we're seeing that had already been taking place.
• 3:57
  Megan Horneman: But we still think September could be a possible meeting for the Fed.
• 4:00
  Megan Horneman: We still have a lot more inflation data to get before they do meet.
• 4:03
  Megan Horneman: That's all we have today.
• 4:04
  Megan Horneman: If you want to history of our podcast, you can go to marketswithmegan.fm