Fed Watch

Fed Responds to Inflation Progress, Economic Resilience

Throughout 2023 and going into the September 20, 2023 FOMC meeting, our view has continued to be that real-time data shows that inflation is on a glide path down, that the lagging metrics used to calculate inflation indicators would come to reflect that, and that when – not if – this happened, the Fed’s response would provide a powerful boost to markets. In recent months, we had begun to see this, with CPI, PPI, and PCE readings having softened through the summer.

To a certain extent, FOMC members noticed. The group’s median estimates for 2023 Core PCE fell slightly between June and September. Fed Chair Jerome Powell also acknowledged this in his press conference, confirming the “good inflation readings that we've been seeing for the last three months.” He added, “We’re seeing progress [on the inflation fight] and we welcome that,” further noting that “longer-term inflation expectations appear to remain well anchored as reflected in a broad range of surveys of households, businesses and forecasters as well as measures from financial markets.” 

To that end, the FOMC paused its hikes, keeping the target range unchanged. This was not a surprise: Fundstrat’s Head of Research Tom Lee called the decision a “fait accompli” on Tuesday evening, and ...

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