There were three important economic reports this week:
- Retail Sales (RSXFS): -0.59% month over month, prior +1.29% m/m. Negative, especially the month before Commercialized Christmas.
- Industrial Production (INDPRO): -0.22% m/m, prior +2.45%. Negative.
- Consumer Price Index (CPIAUCSL); +0.10% m/m, prior +0.44%. Falling energy prices are mostly responsible for the decline.
Unlike last week, this picture is recessionary, especially in retail sales and industrial production.
At this week’s Fed meeting, the gang raised the Fed Funds rate by 50 basis points, to 4.25%. Then Powell came out on stage, read his statement, and answered questions. He said that more rate increases will be appropriate, inflation risks remain weighted to the upside, there will not be any premature loosening of policy, and “we will stay the course until the job is done.” He also said it wasn’t so important how fast we go, but by end of 2023, aggregate rate projections from the Fed gang (a document called “the SEP”) are currently about 5% for the Fed Funds rate. Is that a pivot? No, although dropping to just a 25 bp increase in February would be a slowdown – the CME fedwatch tool (Source – CME) is projecting this outcome as well. Interest rate Shock & Awe is turning into a War of Attrition.
Powell also talked about a huge overhang of vacancies in the labor market, especially in the services sector. The unprecedented labor shortage remains.
by davefairtex 
