No. of Recommendations: 3
Amid signs of slowing inflation, the Fed is raising their rates 1/4%, the smallest increase yet this year. Chairman Powell did indicate more raises were on the table.
Article in the Times:
https://www.nytimes.com/live/2023/02/01/business/f..."
* Fed officials set the policy rate at a target range of 4.5 to 4.75 percent, as expected, up from near-zero at this time last year.
* 'Inflation has eased somewhat but remains elevated,' officials said in their statement announcing the rate decision, while reiterating that 'ongoing increases in the target range will be appropriate.'
* Recent signs of slowing inflation were 'early stage,' Mr. Powell said. He suggested that it would be bad to realize, months from now, that the central bank had not done enough to bring inflation under control. 'I just don't see us cutting rates this year,' Mr. Powell said, defying forecasts from some investors.
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He did mention, though, that decisions to raise rates more would be made month to month, so if we continue to see pronounced disinflation, further raises are not locked in.
The stock market liked it, seemingly optimistic that odds of a soft landing are increasing. UPST, for instance, a company being hurt badly by rate increases and the macro situation, soared 8-9% after the Fed meeting and press conference. The S&P 500 rallied from a small loss to up about 1%.
I'd wager that inflation is going to continue declining fairly quickly. Between the economy cooling a bit due to rate increases, supply chains getting sorted out, and Covid issues fading away, I think most of the drivers of high inflation are dropping away.
One aspect of inflation I'm particularly glad to see reversed is the spike in used car prices, which after an immense spike during 2021 reversed to a 14% loss in 2022. I'm due to replace my 2007 Prius and while I would have welcomed the premium I could have gotten selling it earlier last year, I couldn't find an affordable replacement that I wanted to buy. Hopefully 2023 will yield better results in that search.
