FED Hold Rates For Third Consecutive Month!

FED Holds Rates For Third Consecutive Month

This afternoon, the U.S. central bank, the Federal Reserve concluded its last F.O.M.C. meeting of the year. It's usually at this time when we find out what their plans are, basically. Key lending rates will stay the same as they have been before the previous two meeting, somewhere between 5.25% and 5.5%. FED Chair Jay Powell stated often throughout the year that rates would stay higher for longer and he kept his word.

Present rates are the highest in 22 years. The language filtering through though is that three, instead of two rate cuts are to be expected next year. The period of aggressive rate hikes that began in the spring of 2022 now appear to be over. Not much of a surprise there with hints everywhere that the economy has slowed down, which was the intended goal, to cool inflation.

John Rubino pointed out yesterday in a post on his Substack titled 'Recession Watch: Forget about that soft landing' that credit card usage has dropped to pre-pandemic levels while defaults on those loans are the highest since 1991. Even more startling, he states that pending home sales have dropped to a record low while bank credit has collapsed to 2010 financial crisis levels.

Toy maker Hasbro has announced a plan to reduce its workforce by 20%. It brings to mind a book I read years ago on the origins of the Great Depression. One of the first niches to be severely affected were toy makers and were among the first to go belly up as people began scrounging and buying only basic necessities. 

This is a strong sign the economy has slowed down and the FED's reaction sends the same signal. Also, keep in mind the lag effect associated with rate hikes. It could take 6 months or more for a rate hike's effects to propagate through the economy. We still have 3 months or more to feel the effects of the last rate hike. Things can change a lot during that time (like an upcoming election).

Gold, after a wild week and a half of record highs ($2,140) and then sudden dives ($1,974) is reacting positively to the FED news. It looks like gold has found a new bottom at $2,000 after being range bound around $1,800 for the past 2 years or so.

Gold - December 13, 2023

Looking at oil, WTI Crude remains just below $70, giving us poor folks a prolonged break at the pumps. Bitcoin had dipped below $41,000 early this aft, before bumping back up to $42,782 at time of writing while the USD has dived a full point and is just below 102. That's the power of the FED!

Please see the reference links below for more juicy details.

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Name's Joe and I live in Ontario, Canada. I like writing on a wide variety of topics. I enjoy keeping track of markets, investing and commodities and the crypto sector. Also do some coding for web browsers.

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