I don't know what everyone is so happy about. Yes, Powell said he feels the economy is strong but that was in the context of saying he wants rates to be close to 2% by the end of the year, that's up almost 10 TIMES from 0.25% we started the year with! Just because Powell says he doesn't think it will hurt the economy much doesn't mean it's true, does it? In fact, if you take a look at the Fed's own projections – things really don't look that good at all: Variable Median 1 Central Tendency 2 Range 3 2022 2023 2024 Longer run 2022 2023 2024 Longer run 2022 2023 2024 Longer run Change in real GDP 2.8 2.2 2.0 1.8 2.5–3.0 2.1–2.5 1.8–2.0 1.8–2.0 2.1–3.3 2.0–2.9 1.5–2.5 1.6–2.2 December projection 4.0 2.2 2.0 1.8 3.6–4.5 2.0–2.5 1.8–2.0 1.8–2.0 3.2–4.6 1.8–2.8 1.7–2.3 1.6–2.2 Unemployment rate 3.5 3.5 3.6 4.0 3.4–3.6 3.3–3.6 3.2–3.7 3.5–4.2 3.1–4.0 3.1–4.0 3.1–4.0 3.5–4.3 December projection 3.5 3.5 3.5 4.0 3.4–3.7 3.2–3.6 3.2–3.7 3.8–4.2 3.0–4.0 2.8–4.0 3.1–4.0 3.5–4.3 PCE inflation 4.3 2.7 2.3 2.0 4.1–4.7 2.3–3.0 2.1–2.4 2.0 3.7–5.5 2.2–3.5 2.0–3.0 2.0 December projection 2.6 2.3 2.1 2.0 2.2–3.0 2.1–2.5 2.0–2.2 2.0 2.0–3.2 2.0–2.5 2.0–2.2 2.0 Core PCE inflation 4 4.1 2.6 2.3 3.9–4.4 2.4–3.0 2.1–2.4 3.6–4.5 2.1–3.5 2.0–3.0 December projection 2.7 2.3 2.1 2.5–3.0 2.1–2.4 2.0–2.2 2.4–3.2 2.0–2.5 2.0–2.3 Memo: Projected appropriate policy path Federal funds rate 1.9 2.8 2.8 2.4 1.6–2.4 2.4–3.1 2.4–3.4 2.3–2.5 1.4–3.1 2.1–3.6 2.1–3.6 2.0–3.0 December projection 0.9 1.6 2.1 2.5 0.6–0.9 1.4–1.9 1.9–2.9 2.3–2.5 0.4–1.1 The US GDP has been downgraded 30% from 4% growth to 2.8% growth for 2022 and inflation is up over 50% from 2.6% to 4.3% this year and that's AFTER more than DOUBLING the target raise in Fed funds from 0.9% to 1.9%. What exactly are the markets excited about here? Of course, they are really not that excited as the S&P 500 ( /ES ) is barely at the Strong Bounce line at 4,320 and it must hold for 2 consecutive closes without breaking intra-day for us to count it as clear. The Nasdaq is still 200 points away from a weak bounce at 14,100 as well so what we'll see today and tomorrow is whether or not Powell's happy talk has any legs. IN PROGRESS
I don't know what everyone is so happy about.
Yes, Powell said he feels the economy is strong but that was in the context of saying he wants rates to be close to 2% by the end of the year, that's up almost 10 TIMES from 0.25% we started the year with! Just because Powell says he doesn't think it will hurt the economy much doesn't mean it's true, does it? In fact, if you take a look at the Fed's own projections – things really don't look that good at all:
| Variable | Median1 | Central Tendency2 | Range3 |
|---|
| 2022 | 2023 | 2024 | Longer run | 2022 | 2023 | 2024 | Longer run | 2022 | 2023 | 2024 | Longer run |
|---|
| Change in real GDP | 2.8 | 2.2 | 2.0 | 1.8 | 2.5–3.0 | 2.1–2.5 | 1.8–2.0 | 1.8–2.0 | 2.1–3.3 | 2.0–2.9 | 1.5–2.5 | 1.6–2.2 |
|---|
| December projection | 4.0 | 2.2 | 2.0 | 1.8 | 3.6–4.5 | 2.0–2.5 | 1.8–2.0 | 1.8–2.0 | 3.2–4.6 | 1.8–2.8 | 1.7–2.3 | 1.6–2.2 |
|---|
| Unemployment rate | 3.5 | 3.5 | 3.6 | 4.0 | 3.4–3.6 | 3.3–3.6 | 3.2–3.7 | 3.5–4.2 | 3.1–4.0 | 3.1–4.0 | 3.1–4.0 | 3.5–4.3 |
|---|
| December projection | 3.5 | 3.5 | 3.5 | 4.0 | 3.4–3.7 | 3.2–3.6 | 3.2–3.7 | 3.8–4.2 | 3.0–4.0 | 2.8–4.0 | 3.1–4.0 | 3.5–4.3 |
|---|
| PCE inflation | 4.3 | 2.7 | 2.3 | 2.0 | 4.1–4.7 | 2.3–3.0 | 2.1–2.4 | 2.0 | 3.7–5.5 | 2.2–3.5 | 2.0–3.0 | 2.0 |
|---|
| December projection | 2.6 | 2.3 | 2.1 | 2.0 | 2.2–3.0 | 2.1–2.5 | 2.0–2.2 | 2.0 | 2.0–3.2 | 2.0–2.5 | 2.0–2.2 | 2.0 |
|---|
| Core PCE inflation4 | 4.1 | 2.6 | 2.3 | | 3.9–4.4 | 2.4–3.0 | 2.1–2.4 | | 3.6–4.5 | 2.1–3.5 | 2.0–3.0 | |
|---|
| December projection | 2.7 | 2.3 | 2.1 | | 2.5–3.0 | 2.1–2.4 | 2.0–2.2 | | 2.4–3.2 | 2.0–2.5 | 2.0–2.3 | |
|---|
| Memo: Projected appropriate policy path |
|---|
| Federal funds rate | 1.9 | 2.8 | 2.8 | 2.4 | 1.6–2.4 | 2.4–3.1 | 2.4–3.4 | 2.3–2.5 | 1.4–3.1 | 2.1–3.6 | 2.1–3.6 | 2.0–3.0 |
|---|
| December projection | 0.9 | 1.6 | 2.1 | 2.5 | 0.6–0.9 | 1.4–1.9 | 1.9–2.9 | 2.3–2.5 | 0.4–1.1 |
|---|
The US GDP has been downgraded 30% from 4% growth to 2.8% growth for 2022 and inflation is up over 50% from 2.6% to 4.3% this year and that's AFTER more than DOUBLING the target raise in Fed funds from 0.9% to 1.9%. What exactly are the markets excited about here?
Of course, they are really not that excited as the S&P 500 (/ES) is barely at the Strong Bounce line at 4,320 and it must hold for 2 consecutive closes without breaking intra-day for us to count it as clear. The Nasdaq is still 200 points away from a weak bounce at 14,100 as well so what we'll see today and tomorrow is whether or not Powell's happy talk has any legs.
IN PROGRESS
