Federal Reserve Chairman Jerome Powell speaks during a news conference after the Federal Open Market Committee meeting of the Federal Reserve in Washington, DC, June 14, 2023.
Mandel Yan | AFP | Getty Images
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what you need to know today
Gatherings are also suspended
The S&P 500 closed almost flat, while the Dow Jones Industrial Average fell 0.68% and the Nasdaq Composite rose 0.4%. In Europe, markets were higher on Wednesday. The FTSE 100 edged up 0.1%, with UK GDP rising 0.2% in April, reversing a 0.3% decline in March.
back to interest rate reality
Turkish President Recep Tayyip Erdogan said he would accept the newly appointed finance minister’s advice on interest rate policy.That could mean renewed interest rate hikes to combat high inflation in Turkey, which is 39.6% in MayIt is well known that Erdogan believes that high interest rates lead to inflation.
another t word
France is turning to Elon Musk to build a Tesla Gigafactory in the country, French Digital Minister Jean-Noel Barrot told CNBC. Barrot said Musk was a “great inventor” — though Barrot may not consider Twitter one of Musk’s successes. Last month, Barrot threatened to ban Twitter in the European Union.
(PRO) brake, or brake
DoubleLine Capital CEO Jeffrey Gundlach warned that the Fed will “break something” if it follows through on expectations of further rate hikes later this year. The U.S. economy is already fragile, so it makes more sense to hit the brakes on rate hikes, Gundlach said.
the bottom line
Don’t view the Fed keeping rates unchanged as a positive.
As many analysts have pointed out, this is a “hawkish pause,” meaning the Fed could still hike rates again later this year – as the central bank itself predicts. Using more animal imagery, in considering the Fed’s decision at this meeting, perhaps the bank is less a hawk than a tiger stalking its prey – freezing, pausing before swooping and killing.
This metaphor works in more than one way. Prominent investors and economists have warned that the Federal Reserve could become overzealous in its tightening efforts and dull an already recessionary economy. “There are so many indicators in recessionary territory,” Gundlach said. In fact, Wharton professor Jeremy Siegel is “concerned about whether (the Fed) will stop fast enough.”
Federal Reserve Chairman Jerome Powell seemed aware of these concerns, and he did calm nerves during his press conference. “The conditions for lower inflation that we need to see are developing,” he said. If inflation does fall further, Powell suggested the Fed could deviate from its forecast and keep rates steady. The July FOMC “will be meeting in person” because “no decision has been made,” Powell said.
For investors who feel they are vulnerable prey, it is possible that the Fed will eventually decide to walk away. The market may still be alive.