Pro Perspectives 6/14/23

June 14, 2023

The series of ten consecutive Fed rate hikes has come to an end.
It was telegraphed by the Fed, just two weeks ago, as two voting members introduced the word "skip," related to this June 14 meeting.
As we discussed that day, it was deliberate (a signal to set market expectations).
So, today we follow a unanimous May hike (despite plenty of uncertainty surrounding the bank shock), with a unanimous pause.
This unanimity streak in the Fed might sound familiar, as they were also in complete agreement back in 2021, that the multi-decade high inflation was "transitory."  And subsequently, they unanimously flip-flopped, by late 2021, becoming tough-talking inflation fighters.
In one of the more complicated environments in history, finding 11 (in the case of today's vote) economists to agree with each other, so consistently, is hard to believe.
With that, it's fair to say that unanimity strengthens one of the Fed's very effective tools:  "guidance," otherwise known as manipulating public perception.
In today's case, what else do they unanimously agree on?  None of them see a rate cut this year.
That said, they upgraded their view on growth for the year.  And they see inflation (their favored core PCE measure) sticking at firmer levels.  This fits with the view we discussed yesterday:  hotter growth, hotter than average inflation … hold there and inflate away the massive government debt-load.
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