Thursday, Nov 3, 2022

“Most people spend more time and energy going around problems than in trying to solve them.” – Henry Ford  || 

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MARKETS

Right, now that the November FOMC meeting is over, we can start to obsess about what the Federal Reserve will do in December. This is a very strange arcade game of aim and fire in which the target is the most predictable part of the changing landscape, but the pace of distractions make hitting it especially hard.

Markets jumped when the FOMC statement was released at 2pm EST, which shows how desperate traders were for any sign of a rate hike slowdown. They found it in the middle of paragraph three:

“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.”

It’s almost as if traders read that as “we’re going to pause to see what our work has done so far”. This is bewildering, given that the above sentence was sandwiched between:

“The Committee anticipates that ongoing increases in the target range will be appropriate.”

and

“In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.”