Fed Sets Stage for December Rate Hike

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To a large extent, the FOMC policy statement was a re-hash from the last meeting. The markets largely expected the Fed would officially announce that it will begin to unwind its $4.5 trillion balance sheet. The FOMC said beginning in October the Fed will roll over the principal payments from the Federal Reserve's holdings of Treasury securities maturing during each calendar month that exceeds $6B, and to reinvest in agency mortgage-backed securities the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during each calendar month that exceeds $4B. That is what the Fed has been saying since its June addendum.

Key points in the policy statement:

  • The labor market has continued to strengthen and that economic activity has been rising moderately so far this year.
  • On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined this year
  • Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
  • Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship. Storm-related disruptions and rebuilding will affect economic activity in the near term,
  • Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.
  • The Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent.
  • The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.

As for another rate increase in Dec, Fed officials are divided; some want an increase, others believing inflation is low and don’t want another increase. The Fed is expecting a move to 1.4% for the federal funds rate which indicates an increase in Dec. Continued focus on the Fed with Fed officials hitting the rubber chicken circuit beginning tomorrow with three regional Fed Presidents (Williams (SF), George (KC) and Kaplan (Dallas).

Tomorrow weekly jobless claims expected at 303K +5K from the prior week. The Sept Philadelphia Fed business index (18.0 from 18.9 in August. July FHFA home price index (+0.4% up from 0.1% in June, very dated data).

The bellwether 10 hit 2.28% this afternoon solidly cutting above the next level of chart support at 2.23%. Our outlook turned bearish over a week ago. The next technical support for the 10 is at 2.32%, then 2.40%. The 2 yr note yield now the highest since 2008.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

Austin Hurt

Associate Broker

License: FA100093035

Gold Compass Real Estate, Inc.

4 West Dry Creek Circle Suite 100, Littleton CO

Office: 303-325-5690

Cell: 720-877-1370

Email: sales@coloradohomeblog.com

Web: https://coloradohomeblog.com/

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Austin Hurt

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Associate Broker

License: FA100093035

Cell: 720-877-1370


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