Today's news:
A "substantial majority" of policymakers at the Federal Reserve's
meeting early this month agreed it would "likely soon be appropriate" to
slow the pace of interest rate hikes as debate broadened over the
implications of the U.S. central bank's rapid tightening of monetary
policy, according to the minutes from the session. The readout of the
Nov. 1-2 meeting, at which the Fed raised its policy rate by
three-quarters of a percentage point for the fourth straight time,
showed officials were largely satisfied they could move rates in
smaller, more deliberate steps as the economy adjusted to more expensive
credit and concerns about "overshooting" seemed to increase.
From Scott Grannis:
Thanks to today's release of the November 2nd FOMC meeting minutes, we know that the Fed has "pivoted" as expected; they are backing off of their aggressive tightening agenda. Instead of hiking rates another 75 bps at their December 14th meeting, we are likely to see only a 50 bps hike, to 4.5%, and that could well be the last hike of this tightening cycle—which would make it the shortest tightening cycle on record (less than one year). And they might not even raise rates at all in December—that would be my preference. For more than two years I have been one of a handful of economists keeping an eye on the rapid growth of the M2 money supply. Initially I warned that it portended much higher inflation than the market was expecting. But since May of this year I have argued that inflation pressures have peaked: "Many factors have contributed to this: growth in the M2 money supply has been essentially zero since late last year; the stimulus checks have ceased; the dollar has been very strong; commodity prices have been very weak; and soaring interest rates have brought the housing market to its knees. All of these developments mean that the supply of money and the demand to hold it have come back to some semblance of balance." To sum it up, I think the Fed has gotten policy back on track, so there's no need to do more. In fact, the October M2 release showed even more of a slowdown than previously, thus underscoring the need to avoid further tightening.