The US 30yr Mortgage rate just hit a new high since 2000 as The Federal Reserve counterattacks the highest core inflation rate (6.60%) since 1982.
According to the Taylor Rule (which The Fed has chosen to ignore), a 6.60% core inflation rate implied a Fed target rate of 12.40%. Not likely since Fed Funds Futures data points to …
A maximum target rate of 4.963% at the May 2023 FOMC meeting, significantly lower than the needed rate of 12.40%. The Fed is like the world’s worst bar bouncer.
Rather than accepting blame for the horrific inflation rate crushing the American middle class and low wage workers, Biden is twisting the night away.
The University of Michigan’s consumer sentiment index for housing for October just fell to its lowest level since 1992 as The Fed counterattacks against Bidenflation, causing mortgage interest rates to rise.
Of course, despite slowing home price growth, expensive home prices are really hurting along with expensive rents. But how sustainable are high home prices when REAL average hourly earnings growth is negative??
Bidenflation is just killing us. Now rising prices and The Fed’s counterattack are killing retail sales for American consumers.
US retail sales were sluggish last month, suggesting shoppers are becoming more guarded about discretionary purchases in the worst inflationary environment in decades.
The value of overall retail purchases were little changed in September after an upwardly revised 0.4% gain in August, Commerce Department data showed Friday. Excluding gasoline, retail sales were up 0.1%. The figures aren’t adjusted for inflation.
The median estimate in a Bloomberg survey of economists called for a 0.2% advance in retail sales. Seven of 13 retail categories declined last month, according to the report, including a drop in receipts at auto dealers, furniture outlets, sporting goods stores and electronics merchants. The value of sales at gas stations fell 1.4%, reflecting cheaper fuel prices, but they’re now climbing.
At least Export Prices YoY are down below 10%! I hope exporting inflation to the world isn’t Secretary of State Antony Blinken’s idea of good foreign policy.
My favorite headline of the day is “Macron Reminds Biden to Think Before Speaking: “Biden’s Reckless Rhetoric puts World at Risk”“
* Fed Swaps Lean Toward Back-to-Back Three-Quarter-Point Hikes * Hotter-than-expected September inflation data spark shift
(Bloomberg) — The market for wagers on the Federal Reserve’s policy rate is leaning toward pricing back-to-back 75 basis point rate hikes in the next two central bank meetings after consumer prices rose more than forecast in September.
The rate on the November overnight index swap contract rose to 3.86%, more than 75 basis points above the current effective fed funds rate, while the one referring to December climbed to 4.50%. A total of 142 basis points of rate hikes are now priced in for the next two policy meetings, just short of consecutive three-quarter-point hikes.
Prior to the inflation data, OIS markets were leaning toward the central bank cooling the pace of tightening to a 50 basis point move in December. At Wednesday’s close, swaps priced in around 130 basis points of hikes over the remaining of the year, which is equivalent to 55 basis points for December.
The market also priced in a higher eventual peak for the policy rate, with the March 2023 contract touching 4.864%.
The CPI data was “clearly a shock for the markets and the markets are off because of it,” Seth Carpenter, chief global economist at Morgan Stanley said on Bloomberg television. “There is persistence, particularly in the services side of inflation.”
Excluding food and energy, the Consumer Price Index increased 6.6% from a year ago, the highest level since 1982, Labor Department data showed Thursday. From a month earlier, the core CPI climbed 0.6% for a second straight month.
The Fed has raised its policy rate five times since March, most recently to a range of 3%-3.25% in September, after dropping the lower bound to 0% two years earlier at the onset of the pandemic.
The Fed Funds Futures data is pointing further Fed rate hikes with a turnaround in March 2023.
And with that awful inflation report and the likely Fed counterattack, the two year US Treasury yield has risen to 4.4361%, the highest since The Great Recession and banking crisis.
Fed Fireball! Comin’ at ya!!
Biden and Powell should appear on Saturday Night Live as the joint Debbie Downer. Or Democrat Downer.
To begin with, headline inflation remains high at 8.2% YoY while CORE inflation (headline less food and energy) rose to 6.6% YoY.
Meanwhile, REAL average weekly earnings growth YoY further declined to -3.8% YoY.
On the bond front, the Bank of America ICE bond volatility index rose to Great Recession/banking crisis levels (also achieved during the Covid government shutdowns).
But back to the low-ball BLS inflation data. The biggest gain in price is … fuel oil at 33.1% YoY. Food at home rose 13.0% while gasoline rose 18.2%. Rent, according to the BLS, rose 6.6%.
Biden has probably been told by Ron Klain and Susan Rice that this is a good report.
The US Producer Price Index (Final Demand) printed at a higher than expected 8.5% YoY, throwing cold water on the notion that inflation is “transitory.”
A key US inflation measure due Thursday is set to return to a four-decade high, underscoring broad and elevated price pressures that are pushing the Federal Reserve toward yet another large interest-rate hike next month.
The so-called core consumer price index that excludes food and energy is projected to rise 0.4% in September from the prior month and 6.5% from a year earlier, matching the rate seen in March that was the highest since 1982.
The overall CPI, however, is expected to decelerate to a still-rapid 8.1% annual pace, restrained by a decline in gasoline prices, based on the median estimate.
I feel sorry (sort of) for people like White House Press Secretary Karine Jean-Pierre who has to read ridiculous scripts in defense of awful Federal policies. For example, yesterday she touted Biden’s “accomplishments” of rising real disposable US income and declining gasoline prices. What? Doesn’t she read Confounded Interest?? /sarc
First, REAL disposable personal income growth for the US is NEGATIVE and has been since Biden and Congress embarked on their green energy crusade driving US inflation to its highest level in 40 years. Not exactly a great sales point for the midyear elections.
If we look at REAL average hourly earnings growth, a similar measure, we see that it is negative also. So, what on earth is Jean-Pierre talking about?
She also mentioned that gasoline prices are falling. Except that they are rising again. Apparently her talking points were from September.
Then we have diesel fuel prices, the backbone of the shipping industry, rising like crazy as Biden drains the strategic petroleum reserve.
Meanwhile, The Federal Reserve is tightening their uber-loose monetary policies (thanks Bernanke, Yellen and Powell). Will The Fed pivot to help with the midterm elections OR will The Fed keep trying to extinguish inflation by raising rates and withdrawing Fed monetary stimulus?
Inflation is a multi-headed hydra (from Greek Mythology). It is composed of 1) monetary stimulus (that The Fed is slowly withdrawing), 2) massive, reckless Federal spending and 3) Biden’s anti-fossil fuel mandates. So, when the inflation numbers are out later this week, it will be fun to dissect the damage being done to the US economy and middle-class/low-wage workers.
Take Los Angeles, for example. The life blood of the shipping industry, diesel fuel, is UP 176% under Biden, despite declining for a short period of time. And the DOE Strategic Petroleum Reserve is DOWN -34.7% under Biden.
Here is a photo of Jerome Powell (Fed Chair) trying to fight the inflation hydra. Unfortunately, one of the inflation hydra heads is The Federal Reserve itself.
I feel like I am living in the horror movie “Saw”. The Federal Reserve is tightening their BIG green bag of money to fight inflation … caused by Biden’s energy policies and massive Federal government spending.
(Bloomberg) Stocks fell, pressured by rising Treasury yields and signs that company earnings were set to disappoint. A gauge of the dollar climbed to the highest this month.
European shares declined for a fifth straight session as bond yields jumped amid concerns of persistently high inflation as well as the impact of hawkish central bank policies on global growth. The Stoxx Europe 600 Index dropped 0.6%, with futures on the S&P 500 down by about the same magnitude, pointing to another risk-off day on Wall Street.
The mood is fragile ahead of Thursday’s US inflation data, with the case for another 75 basis-point rate hike likely to be strong if the reading comes in higher than than forecast. Fed officials until now show little sign they are in a mood to pause the rate-hiking cycle despite the potential hit to economic growth.
As The Fed tightens, the MSCI Global Technology index had the worst month since October 2008.
And the NASDAQ Composite index continues to fall with Fed removal of money. Hold on to your lugnuts! Because The Fed hasn’t stopped tightening.
Both ARKK and PayPal have gotten clipped by The Fed too.
The Federal Reserve, in their war on inflation (partly caused by excessive monetary stimulus since late 2008 under Nobel Laureate Ben “The Mad Money Printer” Bernanke) has led to large losses on their Treasury holdings as rates rise. The bill, of course, goes to Janet Yellen and The US Treasury. Ultimately, that burden is paid-for by US taxpayers.
Confounded Interest - Anthony B. Sanders 
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