Latest / Markets with Megan: A Quick Financial Markets Update / Anticipating the Fed's Next Move in an Uncertain Market | Episode 136 | 05-22-24

Transcript

Anticipating the Fed's Next Move in an Uncertain Market | Episode 136 | 05-22-24 · Markets with Megan: A Quick Financial Markets Update

• 0:01
  Megan Horneman: The Fed's just tossing around a little bit more confusion to the markets.
• 0:04
  Megan Horneman: Today it is Wednesday, may the 22nd, and today we got the minutes from the Federal Reserve's meeting that just took place on April 30th and May 1st.
• 0:15
  Megan Horneman: And while coming out of that meeting, the tone from the committee was relatively dovish, or at least that's what the markets had taken their statement as.
• 0:24
  Megan Horneman: But when we get, usually a couple of weeks later, we'll get the actual official minutes from the meeting and we get a lot more detail about what was actually discussed.
• 0:33
  Megan Horneman: And when you read these minutes or go through some of these things, this is not a dovish Federal Reserve.
• 0:39
  Megan Horneman: In fact, quite a few of these comments has suggested that they may be willing to raise interest rates again this year.
• 0:45
  Megan Horneman: So I'm just going to, instead of read the entire minutes for you, which is many, many pages long, I'm going to go through just a couple of the highlights.
• 0:53
  Megan Horneman: There were several officials that expressed uncertainty about the degree to which the Fed policy is actually restraining the economy, meaning that we've talked about financial conditions are actually still very easy, so it's not constraining the economy with all of these rate hikes in the manner that they would have anticipated.
• 1:12
  Megan Horneman: That means.
• 1:13
  Megan Horneman: That's why inflation isn't coming down as quickly as they would like.
• 1:21
  Megan Horneman: They take longer than they previously anticipated for them to get that confidence that inflation is coming to 2%, and some had expressed the willingness to raise rates if they needed to Just a couple other ones.
• 1:34
  Megan Horneman: They're worried inflation's too stubborn to justify a rate cut.
• 1:38
  Megan Horneman: There's this disinflation period that may take longer than expected.
• 1:43
  Megan Horneman: And then the other thing that's interesting, aside from just talking about interest rates, was that some of the Fed officials would have supported keeping that balance sheet reduction plan in place.
• 1:55
  Megan Horneman: So that's where they had a significant amount of treasuries that they were letting roll off their balance sheet, and they did end up reducing it at the meeting, but there were several officials who fought back on that.
• 2:07
  Megan Horneman: So what are we getting out of this?
• 2:10
  Megan Horneman: The markets didn't like it.
• 2:11
  Megan Horneman: That's not surprising.
• 2:12
  Megan Horneman: The markets have been hitting record highs with the anticipation that everything is butterflies and roses out there, and unfortunately it is not.
• 2:21
  Megan Horneman: The Federal Reserve has once again given us some conflicting information.
• 2:26
  Megan Horneman: Markets don't like that.
• 2:27
  Megan Horneman: They want transparency out of the Federal Reserve.
• 2:29
  Megan Horneman: So we think that this is another reason we're going to see some volatility throughout the summer.
• 2:35
  Megan Horneman: The expectation is for rate cuts in September.
• 2:38
  Megan Horneman: That's what the futures market's pricing in.
• 2:40
  Megan Horneman: We've told you that we think that there's a pretty good likelihood that they may have to stay on hold for the remainder of this year, because inflation is just kind of stuck here and they need a lot more evidence that it's getting to that 2% target before they can cut rates.
• 2:54
  Megan Horneman: The only thing that would really change that is if we get a dramatic decline, rapid decline, in economic growth.
• 3:00
  Megan Horneman: We are seeing some weakness from the consumer.
• 3:02
  Megan Horneman: That is concerning, but the rest of the economy is just kind of trudging along here.
• 3:07
  Megan Horneman: So we'll be back with some more economic data for you.
• 3:10
  Megan Horneman: There's some housing information we'll come back with tomorrow, and that's all we have today.
• 3:14
  Megan Horneman: If you have any questions or comments, please feel free to reach out to podcast at Verdence.
• 3:18
  Megan Horneman: com.
• 3:18
  Megan Horneman: Thank you,