Fed Likely to Pause as Economy Shows Positive Signs
Since the Fed met last July, the economy has moved in the direction the Central Bank hoped to see, inflation continues to moderate, growth remains solid and the job market is showing signs of cooling. Given this backdrop, when the Fed meets on Wednesday 9/20th policy makers are likely to decide they can afford to wait and see if progress continues and as a result, a pause is a foregone conclusion.
Market Focus Turns to Fed’s Interest Rate Projections
Focus for the markets at this point is shifting more towards what comes next. Some clues will come in the updated interest rate projections, which will be released along with FOMC statement on Wednesday. The markets will focus on hints about further hikes this year — how many dots point to one more and how many point to more than one — and given recent inflation readings it might lead the Fed to forecast one additional hike this year. But the markets will also be watching the 2024 and ’25 dots to see if the nine cuts in the June dot plot — four next year and five the year after — remain. All the talk of “higher for longer,” especially at Jackson Hole suggests the Fed may not want to start cutting as soon as the market currently expects.
Fed’s 2023 Dot Plot Could Hint at November Rate Hike
If, as we expect, there is still one more rate hike in the 2023 dot plot median, it will indicate the central bank is leaning toward a November hike, maintaining the current tightening pace of a quarter-point increase. Even if inclined to hike in November, participants will not show their cards this week. Yes, the dot plot will show how many expect another increase, but Powell will not commit to it, sticking to the data-dependent rhetoric that all future FOMC decisions is data dependent.
Gabelli’s Treasury MMF: A Stable Option Amid Rate Changes
No matter what the Fed decides at this upcoming meeting, there is one product we offer at Gabelli which is directly affected by a change in short term interest rates; the Gabelli US Treasury MMF. A vehicle designed to offer stability of capital, liquidity and income. The Fund invests in 100% US Treasuries, is among those funds with the lowest expense ratio in the industry, (at 8 bps) has check writing , daily liquidity, is state and local tax free, with a portfolio management team who each has over 30 years of experience. An attractive option for your short- term cash investment needs.
