Fed’s Jerome Powell Signals Extended Pause in Interest Rate Rises

Recent economic figures show “ongoing progress” toward goals, U.S. central bank chair says

Fed’s Jerome Powell Signals Extended Pause in Interest Rate Rises - WSJ

The price of money. For more than three decades, it was falling. Now it’s going up.

For economics wonks, the price of money that balances savings and investment while keeping inflation stable is called the “natural rate of interest,” or r-star.

In nominal terms, that means 10-year Treasury yields could settle somewhere between 4.5% and 5%.

https://englundmacro.blogspot.com/2023/10/the-price-of-money-for-more-than-three.html

Star

September 2023, warmest on record by a large margin

The global average surface air temperature was 16.38°C – 0.93°C above the 1991-2020 average for September, according to the latest monthly bulletin from the EU Copernicus Climate Change Service (C3S), marking the highest positive anomaly for any month in the ERA5 dataset.

https://climate.copernicus.eu/september-2023-warmest-record-large-margin

2050

Initial jobless claims fell to 198,000 in the week ending Oct. 14, according to Labor Department data out Thursday. That was below all estimates in a Bloomberg survey of economists.

US Jobless Claims Drop to Lowest Since January at 198,000 - Bloomberg

There remains a lot of anxiety over whether inflation in the US will gather steam all over again.

Part of this worry stems from the fact that there were multiple bouts of inflation in the 1970s, which was the last time the US had a serious inflation problem.

https://www.bloomberg.com/news/articles/2023-10-19/a-different-way-of-looking-at-the-1970s-period-of-high-inflation

Stagflation

Egypt’s message to western diplomats has been clear:

it will deliver aid into Gaza but will resist any push for it to accept large numbers of Palestinians.

Sameh Shoukry, Egypt’s foreign minister, on Monday warned that “forced displacement” was no solution to the Palestinian crisis.

In more stark language, a senior Egyptian official told a European counterpart: “You want us to take 1mn people? Well, I am going to send them to Europe. You care about human rights so much — well you take them.”

Financial Times 17 October 2023

https://www.ft.com/content/feab5a29-a10a-4d6c-9035-ece2546c12a3

Nordeas räntenetto

beräknas ha ökat från 1.407 miljoner euro under jämförelsekvartalet till 1.879 miljoner euro

DI Morgonkoll 19 oktober 2023

Min gissning är att vi står inför en mycket stor omställning. Inte bara i Sverige, men kanske framför allt här då vi haft en exceptionellt låg ränta 2010-2020.

Vi ser att SBB går omkull. Nu är Balder och Castellum - som tillsammans är tre gånger så stora - på fallrepet. Vi har en rad andra bolag i och utanför Sverige som inte kan leverera en avkastning som slår obligationsräntan.

Mattias Lundbäck på Fb 19 oktober 2023

https://www.ekonomism.us/

The Trusted 60-40 Investing Strategy Just Had Its Worst Year in Generations

Some analysts say the crux of the portfolio’s success—bonds’ tendency to rise when stocks fall—generally happens when inflation and interest rates are relatively low.

They argue that expectations for a prolonged period of higher rates and lingering inflation will weigh on both stocks and bonds, fostering a market environment that looks much different than in recent decades.

https://www.wsj.com/finance/investing/investing-stocks-bonds-strategy-changing-91b7589d

All of a sudden, investors do have some alternatives.

“There is no alternative” — or TINA — has been the battle cry of investment analysts and advisers for the best part of a decade. As interest rates stayed close to zero, money managers typically saw stocks as the only viable investment option to give desirable returns.

That’s changed. The mood music has shifted since the Federal Reserve began its retreat from ultra-loose monetary policy. All of a sudden, investors do have some alternatives. The 10-year Treasury yield has almost reached 5% for the first time since 2007, and cash is yielding more than that.

With cash you actually get the cold hard money in your hands, rather than relying on accountants to calculate corporate profits correctly

The strategy of putting 60% of assets in equities and 40% in Treasuries is set to outperform cash by an annualized 4.1 percentage points, and inflation by 4.5 percentage points, over the next 10 years, strategists at JPMorgan said

Indeed, JPMorgan believes that investors can boost their returns by an additional 0.6% percentage points annually

That does sound good. But if you’re not confident in their reasoning, There Is An Alternative.

John Authers Bloomberg 18 October 2023

https://www.bloomberg.com/opinion/articles/2023-10-19/tina-stocks-finally-have-an-alternative-in-bond-and-cash-yields

TINA vs. TARA, TAPAS and TIARA

https://englundmacro.blogspot.com/2023/03/tina-vs-tara-tapas-and-tiara.html

The Fed Still Has a Lot of Quantitative Tightening to Do

The upward pressure on long-term interest rates from QT will persist until late 2025.

For more than a year, the Fed has been shrinking its holdings of Treasuries and mortgage-backed securities at a rate of about $75 billion a month.

This process, known as quantitative tightening, gradually reduces the amount of excess cash reserves in the banking system.

The aim is to reach a level of reserves adequate to ensure that banks can satisfy their customers’ variable demands for cash and meet regulatory liquidity requirements.

Bill Dudley Bloomberg 18 oktober 2023

https://www.bloomberg.com/opinion/articles/2023-10-18/the-fed-has-a-lot-of-quantitative-tightening-to-do