💣The pain continues🕹

The Fed announced its third consecutive rate hike of 0.75%, signalling that more pressure is on the horizon until inflation is tamed. This brings the policy rate between 3% to 3.25%, last seen in early 2008. 

Consistent with our expectations, Uncle Powell maintained being data-dependent and making decisions based on meeting by meeting. The highlight is the forecast or the dot chart. It showed that officials expect the rate to rise above 4.5% next year. 

🎯What do the dot graphs say? 🔦

Collectively, the latest dot graph is more hawkish as it is likely to leave the rate at a higher level for a longer time than most market strategists initially expected. The latest forecast also means around another 1.25% rate hike this year. This hints at a possibility of another 0.75% in November, followed by a 0.5% in the December FOMC meeting. 

Pika World continues to be hit by trades in Russell small caps, and we will take a more cautious stance in our trades until we see significant improvement in the inflation narrative. 

💰Treasury Yield spikes for a moment🗽

The 2-year treasury yield rose sharply to around 4.11% when the FOMC announced its decision. The move in this short-term rate often correlates with the expectation of where the Fed funds rate will peak. Some called it the terminal rate. 

There is a growing expectation for it to move north towards 4.6% next year. It is likely to ripple through also many credit loans rate and further dampen economic demand with the ultimate goal of balancing the supply and demand in the economy. 

On the contrary, we are seeing a more stable 10-year Treasury yield. It could also reach a peak since people buy the treasury bond, often seen as a haven in difficult economic times. 

📦What’s on the menu today?🔭

At 8.30 pm, we will welcome the Initial Jobless Claims. It will likely remain at 218K, not far from 213K in the prior period.