Wednesday, Sept 20, 2023

watch those FOMC projections, South Korea, offshore crypto, regulator frustration

“It may be that we have become so feckless as a people that we no longer care how things do work, but only what kind of quick, easy outer impression they give.” – Jane Jacobs (1961) ||

Hi everyone, and happy Fed Day! It’s astonishing how watching central bankers speak has become a group activity, to be celebrated with beers and popcorn and bingo games.

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IN THIS NEWSLETTER:

• FOMC: It’s the projections that count

• Offshore crypto assets

• FOMC bingo

• Two compelling interviews

WHAT I’M LOOKING AT:

FOMC: It’s the projections that count

Today we get the decision from the FOMC on US interest rates. The decision itself is not interesting, since it is pretty much a given that the Fed will decide to pause. What will be more significant for the market outlook is the release of updated Summary of Economic Projections (SEP).

Why it matters:

One of the key variables the market will be looking at is the official forecast for the federal funds rate.

As a reminder, at the June meeting, the FOMC raised its fed funds rate expectation for the end of 2023 from 5.1% to 5.6%, effectively pencilling in two additional rate hikes. I don’t think we’ll see another raise today – we probably have one more hike coming this year, which will bring us up to the target, but the Fed is likely to exercise caution over future hikes given the recent uptick in the unemployment rate.

(table via the Federal Reserve)

We could, however, see an increase in the expected rate for the end of 2024.

In June, this was raised from 4.3% to 4.6%. This suggests four rate cuts from the expected 5.6% level, which the Fed is unlikely to want to start until it is certain that inflation is heading down to the 2% target.