End of Year Tone is Set

Obviously Powell didn’t want to throw the bulls too much of a bone yesterday as we all know the propensity for the Bulls to take any hint of any “pivot” as a momo to go hot and heavy with the BUY button and that’s exactly what transpired yesterday. We saw this on the CPI number last month and we saw it again with Powell yesterday. Look we get it, decades of conditioning by the FOMC themselves and their renowned FED PUT have led all the sheep to a one way path. This path is driven of course by continued Global Central bank monetary expansion as we pointed out in yesterdays free note.

As far as the main theme from Powell yesterday the usually double speak to throw off AI and ML bots and give them a little bit more to chew on:

It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting.

Two questions we have are,

1. Pray tell what that “level of restraint” actually is or at least give a hint.

2. Moderating is that the new term for one more and done, wait and see after December?

Long time readers know our base case call is December is the last hike of this regime and inflation is already coming down hot and heavy. We know the consumer will continue to reach into the credit spigot to play the game, however businesses know things are cooling and that monetary policy is affecting every aspect of the economy at this point, with a lag of course, but this is just the first two innings, 7 left to go…

Powell also said that “cutting rates is not something we want to do soon.” The markets ignored that because, well the global bond markets have done that job for them already as noted by this heavily inverted US Govt 10/FF: