Making Sense

"Money may not be everyone's goal for it's own sake, but it's everyone's unit of account" The Fed announced the monetary policy decision overnight and the kept the interest rates unchanged at 5.25% - 5.50%. The key takeaways from the decision, SEP and Post Policy Conference are: SEP Projections: All participants saw the peak Fed Fund Rate at the current levels of 5.25% - 5.50%. For 2023, Real GDP was revised 50 bps higher and Inflation projections were lowered by 50 bps. As per Fed median projections, median estimates are for 75 bps of rate cuts in 2024 and 100 bps of rate cuts in 2025. While cumulative rate cuts over the 2 years stay at 175 bps over the two statements (sep and dec), 25 bps of rate cut has been brought forward in 2024.  In 2024, Fed sees positive but below trend growth ( Fed sees 2024 as the year of below trend growth at 1.40%) , U/R holding steady, Inflation closer to the 2% handle.  The message from the post policy conference was  Economic A...

In February, ISM Services PMI registered 55.1% (marginally lower than prior reading of 55.2%), showing a growth in February for the second consecutive month after a reading of 49.2 % in December, the first contraction since May 2020 (45.4 %). For a quick understanding of how the components have moved, look below. The market is most concerned about inflation and while the prices paid index continues to be elevated , it is gradually moving towards equilibrium and the supplier delivery time is reducing which is supportive of lower prices. Business Activity Index at 56.3% (prior 60.40%) New Orders Index at 62.6% (prior 60.40%) Employment Index at 54% (prior 50.00%) Employment activity in the services sector grew in February after an unchanged reading in January Supplier Deliveries Index at 47.6% (prior 50.00%) - The number indicated the fastest delivery performance since June 2009, when the index registered 46 %. Note that Supplier Deliveries is the only component that is inversed; a readi...