Fed Not Even Close To Guiding For Rate Hikes

Fed Meeting Coming

Fed’s September meeting is on Wednesday. We all don’t expect the Fed to raise rates for the next year at least, so it’s obviously not going to do so this week. In fact, you can't find anyone who thinks the Fed will raise rates at this meeting. The chart below shows Cornerstone Macro’s projection for the median dots in 2021, 2022, 2023, and the long run. 

They see no change from the June meeting. Keep in mind, 2023 guidance is new because we are almost done with this year. Personally, I wouldn’t be shocked if the Fed raised rates in 2023 or even before then.

(Click on image to enlarge)

Remember, current guidance is about manipulating the current economy, not actually predicting in earnest when rates will change. If the Fed was to project a rate hike in 2023, it would cause the stock market to swoon because that’s a hawkish move. Speculation would be that if the Fed is willing to come out in favor of future rate hikes with the unemployment rate still high, imagine what they will do when the unemployment rate falls further. 

People would speculate if this was the first change of many even if the Fed said that it wouldn’t change its guidance. Therefore, it’s impossible for guidance to change in the near term even though rates might be hiked in 2022 or 2023.

Guidance might not even change for all of 2021. It depends on how the new COVID-19 testing, treatments, and vaccines go. It will be interesting to see if the points made in the Jackson Hole speech slightly alter anything the Fed does. People are very interested in the Fed’s projection for the unemployment rate in 2021 since it has fallen so much recently.

Bad News For Mobility

Mobility took a hit this past week because the spike in traveling was related to the Labor Day holiday weekend. The chart below shows the 7-day moving average of the mobility composite index took a nosedive in the past few days. TSA throughput growth has been flat in the past few months as it is currently down 67% yearly.

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