The dot plot of FOMC participants is for tighter policy through all of next year.

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Federal Open Market Committee FOMC rate hike expectations

By a 12-7 margin, the Fed Summary of Economic Projections shows the most likely interest rate projection for the December 2023 meeting is now 5.50 percent to 5.75 percent.

That is an additional hike on top of the Wednesday hike to a range at 5.25 percent to 5.50 percent.

The median projection for December 2024 is 5.0 percent, but one Fed member forecasts 6.0 to 6.25 percent.

Major Uncertainty

The range of projections for 2025 is very amusing from 2.5 percent to 5.75 percent. The median projection is between 3.75 percent and 4 percent.

Confidence Levels

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There are only 3 months to the December meeting so confidence levels are pretty high.

Looking way ahead, the 70 percent confidence level for 2026 is from 0.0 percent to 5.5 percent. Thus, the Fed thinks that 30 percent of the time interest rates will be outside that range.

In general, the Fed is not very confident, nor should it be, and neither am I.

On the data front, The Fed Is Making Decisions on Poor, Untimely Data, Frequently Revised

Let’s start with a discussion of poor employment data, but the problems don’t stop there, or even in the US. Poor data is international.

Looking ahead, we do not know who will win the next presidential election or if one party will control Congress plus the White House.

Inflation From Hell or Something Else?

If Democrats pull off a clean sweep of the House, Senate and White House, expect to see inflation from hell on many fronts: Student debt cancellation, expansion of earned income credits, more food stamps, and even more insane environmental policies.

It would not surprise me one bit to see Medicare for all, and if so with drastic fiscal and inflationary consequences.

Note that Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already.

Unfortunately, Biden’s Solar Push Is Destroying the Desert and Releasing Stored Carbon

It’s more difficult to project what happens if Trump wins, but it is certain he will roll back inane energy regulations.

If Republicans pull off a clean sweep, then it’s possible we see some fiscal sanity. However, Trump had two years in which Republicans also held the House and Senate but he accomplished virtually nothing on the fiscal front.

Tax cuts did not pay for themselves and the fiscal deficit exploded.

Tariffs and Sanctions

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Trade data from the BEA, chart by Mish

If your top priority is more tariffs and sanctions then toss a coin. Trump and Biden are equally bad. Biden kept in place all of Trump’s inflationary tariffs and sanctions, even adding more.

Trump did manage to prove trade wars are neither good nor easy to win.

For discussion, please see Mexico Jumps Ahead of Canada as the Largest US Trading Partner

Biden escalated Trump’s policies proving he is even worse.

Debt to GDP Alarm Bells Ring, Neither Party Will Solve This

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Debt-to-GDP image from the Congressional Budget Office, annotations by Mish.

I stick with my baseline assumption that Debt to GDP Alarm Bells Ring, Neither Party Will Solve This

“Neither party will fix the deficits. Neither party will do anything about mounting debt. No one will do anything about anything because the political system is totally broken.” Mish

Neither party will fix anything, but Democrats will dramatically worsen the outlook.

So why shouldn’t interest rates be higher for longer?

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