The Fed raised rates by 75 basis points on Wednesday; looking forward, Powell is hawkish, and talks about maintaining a “restrictive policy for some time.” For those who want to get it from the horses mouth, and have a lot of time to kill, you can listen here (Source – FOMC/YouTube).
Wolf Richter’s take on the Fed rate increase, as well as inflation, can be summed up in one word: services. While the prices of goods due to shortages (supply chain issues, mysteriously destroyed processing plants, etc) were the initial cause for all the inflation, now inflation has migrated into services as well (Source – WolfStreet). Wolf more or less sees a repeat of the 1970s. Minus any ability to really control this outcome. And, I believe the current, mysterious “labor shortage” just adds fuel to this services-inflation too.
This week saw a massive rally in the buck; it wasn’t the biggest weekly move ever (that was an almost -5% move in October 2008), but the buck did rise 3.46 [+3.06%] to 112.96. This move marked a new 20-year high. Anyone overseas who borrowed in dollars in 2021 when Grandpa moved into 1600 Pennsylvania now is looking at a 26% increase in their loan balance. If they want to pay it off, they must raise 26% more than their original loan balance in their own currency to get out of debt. This, as the world is headed into recession. A dollar rally of this magnitude is a clear risk-off signal.
And from the other side of the pond – the Euro. This week’s plunge below parity (1.00) was relatively dramatic also; down 0.03214 [-3.21%] to 0.969. Money appears to be leaving Europe for the U.S., although I don’t want to just single out Europe, as money is leaving the UK too: GBP/USD: -0.05 [-4.76%] to 1.09. A falling currency magnifies the effects of inflation for items that have an international price, such as oil. A 5% one-week drop in the GBP/USD is not a small thing.
Equities didn’t like all the talk about more rate increases; S&P 500 (SPX) fell 4.65% on the week, with all the losses happening post-announcement. The sector map looked bearish, with sectors energy -11.29% and discretionary -7.87% leading lower, with staples and utilities doing best.
by mikies123 
