Key Takeaways
  • February’s FOMC minutes and January’s PCE numbers suggest there will be another rate hike at the next FOMC meeting in late March.
  • Congress was not in session this week, and key members of Congress were not in DC.
  • The next key date in the debt-ceiling talks will be March 9, when President Biden unveils his federal budget for fiscal year 2024.

This week combined the release of the minutes of the Fed’s Federal Open Markets Committee (FOMC) from early February with the release of the Fed’s preferred inflation number, the Personal Consumption Expenditures price measure. The PCE climbed 5.4 percent in January, basically the same as the gain of 5.3 percent the prior month. The January inflation numbers, combined with the release earlier in the week of the minutes from the FOMC meeting on 1/31-2/1, point towards another increase in rates when the FOMC meets next month on March 20/21.

Chair Powell has done a good job of telegraphing policy and not surprising markets, and both his remarks and the February minutes point towards another increase.  The minutes included the interesting statement that while the 25bps increase was unanimous during the meeting, some of the Committee members suggested they could support a 50bps increase.

Before the next FOMC meeting in late March, the data for inflation and employment for February will be released.  The Fed Chair has made it clear that their decisions are data driven; but as of today it appears all the tea leaves point to another 25bps increase in March.

Debt ceiling

There were no public statements on debt ceiling talks this past week, as members of the House and Senate were out of DC for the Presidents’ Day break. The Speaker was traveling around the country raising money for Republican candidates, and Leader McConnell was in Europe at the Munich Conference assuring NATO allies of the bipartisan support in Congress for the war in Ukraine.

Congressional staff had discussions of possible spending cuts, but the next key date is March 9 when the Biden Administration will unveil its budget for fiscal year 2024 which begins on October 1, 2023.  Once the Administration’s proposal is made public it will put pressure on Republicans to show their cards on budget cuts they want to see as part of a debt ceiling deal.

Disclosures (show)

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