1. INTEREST RATE HIKE
• On November 2nd, the FOMC voted to increase the Federal Funds Rate by 75 bps for the fourth consecutive time, taking the benchmark interest rate to its highest since early 2008. The current Federal Funds Target Rate sits at 3.75%-4.00.
• In the accompanying statement following the meeting, the Fed shifted its tone slightly, indicating that it intends to “take into account the cumulative tightening of monetary policy” and “lags with which monetary policy affects economic activity and infl ation.” The statement signals that while the committee remains committed to raising rates to rein in infl ation, they are beginning to look for signs that may justify a pivot.
• Stocks initially rose on the news of the rate hike but began to fall during Jerome Powell’s news conference in reaction to the marginally more dovish statement on the future path of monetary policy.
• While a new summary of economic projections did not accompany this month’s meeting, Chair Powell stated in his press conference that he now expects the “terminal” rate — the level at which the Fed stops further rate increases — to be higher than what it was thought to be a few months ago. The higher rates need to be to tame infl ation, the harder it will be for the central bank to achieve a monetary “soft landing.”