1900 Wealth’s Post

As investors watch for whether the Federal Reserve will cut interest rates at its September meeting or wait until the post-election November or December meeting, it is important to note that the Fed easing financial conditions in an election year is not without precedent. https://bit.ly/3WDmieD

Key issue now for all investors.

As investors watch for whether the Federal Reserve will cut interest rates at its September meeting or wait until the post-election November or December meeting, it is important to note that the Fed easing financial conditions in an election year is not without precedent. https://bit.ly/3WDmieD

The Federal Reserve decided at their latest meeting to hold interest rates steady. This is the eighth consecutive policy-setting meeting where interest rates have remained unchanged. But what does that mean going forward? Read more in our August Financial Pulse: https://bit.ly/4dlKV5v #M3Investments #FinancialAdvisors #FinancialPulse

As expected, the Federal Open Market Committee held rates steady at 5.25-5.5% and announced that starting in June they will slow the pace of monthly Treasury security redemptions from $60 billion to $25 billion. The policy vote was unanimous, thus, likelihood of interest rate cuts before the fall/end of the year look to be off the table without some unforeseen shock to the system.  

"In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to returning inflation to its 2 percent objective." Federal Reserve issues  Federal Open Market Committee statement, Press Release, 12 June 2024, https://lnkd.in/gGSPapJ2

https://lnkd.in/dvbBzfsU The Federal Reserve doesn’t hit that target rate by decree, but by regularly buying and selling U.S. short term debt. And unlike consumers, firms, or even investment banks, the Federal Reserve has an essentially unlimited capacity to engage in such transactions. Yes, it really can create money out of thin air. Because the Federal Funds Rate sets the borrowing cost of U.S. bank-to-bank overnight lending, that rate subsequently influences other interest rates, whether mortgage rates or rates charged to businesses on loans for capital investments And when Fed Lowers rates , it basically Injects Money into the U.S economy

Throughout the week, Federal Reserve officials reiterated their stance on monetary policy, echoing "higher for longer" sentiments and pushing back against the notion of rate hikes. Concerns persisted over the lack of progress in disinflation, emphasizing the necessity for greater confidence in economic data before any rate adjustments. Tom Barkin expressed confidence in the current interest rate, asserting its ability to steer inflation back towards the 2% target, buoyed by a robust labor market. While he did not perceive the economy as overheated, disappointing inflation figures lingered. The strength of the labor market, however, offered a window for bolstering confidence before contemplating rate cuts. John Williams anticipated eventual rate cuts but deemed the current monetary policy stance as appropriate. Observing a slowdown in the economy, he expressed contentment with quantitative tightening, which did not disrupt markets. Neel Kashkari foresaw two rate cuts but left open the possibility of a hike should inflation persist. Despite not holding voting rights until 2026, his comments leaned towards the hawkish end of the spectrum. Austan Goolsbee adopted a dovish stance, disputing claims of stalled inflation and suggesting that monetary policy remained relatively restrictive. However, he refrained from indicating the timing of any potential cuts. Susan Collins remained optimistic about reining in inflation to meet the Fed's target. While supply chain improvements eased inflationary pressures, she advocated for slower economic growth to temper demand, reflecting a "higher for longer" perspective. Mary Daly outlined two scenarios: one where inflation trends downward alongside a cooling market, warranting rate cuts, and another where inflation remains stagnant, suggesting that cuts are unwarranted unless the labor market falters. Michelle Bowman dismissed the idea of rate reductions in 2024, citing persistent inflation and advocating for patience before contemplating policy easing to uphold the Fed's credibility. Lisa Cook noted the financial resilience of households, banks, and firms, capable of managing debt obligations and absorbing shocks. However, she flagged concerns regarding surging auto and credit delinquencies, particularly among small banks holding commercial real estate assets. Additionally, she cautioned against the rapid expansion of private credit with potential risks stemming from weak underwriting and excessive risk appetite. Michael Barr talked about potential significant changes in capital requirements for large lenders, with the plan entailing a 19% increase for the eight largest banks and a 5% increase for midsize banks.

Federal Reserve to reduce QT from $60B to $25B per Month - Effective in June 2024! In my prior post, I outlined my feedback to Federal Reserve - Boston CEO & President Susan Collins (at NACD-NE event at Federal Reserve in Boston on April 16) to ask the Federal Reserve to start dropping Interest Rates in June (2024), since it is my opinion that current Federal Reserve policy is actually contributing to the recent pause of dropping inflation rates. (See my prior Linked-In Post). While the Federal Reserve FMOC Statement today (May 1, 2024) did not disclose its planned timeframe to start easing interest rates from the current 5.25% - 5.50% range, it did announce that "Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion." This change in FED policy in June 2024 to reduce the rate of Quantitative Tightening ("QT") by almost 60%, should take some modest pressure off interest rates, and may slightly reduce some inflationary pressures. https://lnkd.in/gxhMJfuY

Tomorrow is when the Federal Reserve holds their meeting This means there's a 63% chance of half a point cut In laymans terms, it means half of 1% interest rate will be reduced For investors, they're getting prepared For economists, they're waiting for their portfolio to increase For business owners, this means you better have your core capital stabilized and a max of 1 years worth of resources on standby Look at the Fed Funds Effective Rate, and tell me that it isn't very similar to 06-07: https://lnkd.in/gJ2B7Uhz It's going to increase consumable goods, while decrease the value of equity, business, assets, property, stock, etc. As Scott Skyrm said on his book 'The Repo Market' - "And herein lies the Fed's dilemma. If they run down the SOMA portfolio too much, they will break something. If they don't, we are stuck with inflation." Basically this means we're stuck with rising prices, and something is going to break in the economic system very soon. Don't think this is hopeless if you're improving yourself, and building value in your environment For those that choose to idly sit by, or live a life without purpose, you will lose what you hold onto right now. The age old saying is 'Those who fail to plan, plan to fail' #business #economics #finance #wealth #investing #sales #marketing #consulting