All Things in Moderation

Morning Report: Mixed signals from the Fed

Vital Statistics:

Stocks are higher this morning on no real news. Bonds and MBS are up.

The Fed’s decision to hold rates steady yet forecast two more rate hikes appears inconsistent, at least to ex-Treasury Secretary Larry Summers.

“This meeting felt like it was driven as much by the internal political dynamics of the Fed, as by any consistent and coherent reading of the economic situation and that was a bit disturbing to me…I found the Fed’s action a little bit confusing. I understand the arguments for not hiking this at this meeting. But those arguments wouldn’t point towards signaling two further rate increases, they wouldn’t point towards significantly revising the forecasts towards a stronger economy and more inflation…I understand the arguments for having gone the other way,” Summers continued. “But I don’t really understand the internal consistency of an approach of pausing at this meeting, but then signaling two further rate hikes down the road and signaling that they no longer expect unemployment to increase nearly as much as they used to expect it.”

I am not sure what “internal political dynamics” refers to in this context given that the vote was unanimous. The minutes from the meeting will make interesting reading when they come out in a few weeks.

Consumer sentiment improved in June, according to the University of Michigan Consumer Sentiment Survey. Sentiment is improving, however it is still low on a historical basis;

Inflationary expectations for the next year improved dramatically, falling from 4.2% in May to 3.3% in June. Longer-term expectations remain persistently in a 2.9%-3.1% range.

Mortgage credit decreased in May, according to the MBA’s Mortgage Credit Availability Index. “Mortgage credit availability decreased for the third consecutive month, as the industry continued to see more consolidation and reduced capacity as a result of the tougher market. With this decline in availability, the MCAI is now at its lowest level since January 2013,” said Joel Kan, Vice President and Deputy Chief Economist. “The Conforming index decreased almost 4 percent to its lowest level in the history of the survey, which dates back to 2011. The Jumbo index fell by 1.5 percent last month, its first contraction in three months, as some depositories assess the impact of recent deposit outflows and reduce their appetite for jumbo loans…Additionally, lenders pulled back on loan offerings for higher LTV and lower credit score loans, even as loan applications continued to run well behind last year’s pace. Both Conventional and Government indices saw declines last month, and the Government index fell by 3.8 percent to the lowest level since January 2013. In a market where a significant share of demand is expected to come from first-time homebuyers, the depressed supply of government credit is particularly significant.”

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7 Responses

1. 

   Brent Nyitray, on June 16, 2023 at 9:16 am said:

   The Bud Light boycott is really affecting the company. Inbev is offering “support” to front-line employees and wholesalers.

   https://www.sec.gov/Archives/edgar/data/1668717/000119312523167898/d307416d6k.htm

   This is fascinating.

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   • 

     Let the mutherfuker burn!, on June 16, 2023 at 10:04 am said:

     Third, to all our valued consumers, we hear you.

     What is it they are hearing I wonder?

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     • 

       Brent Nyitray, on June 16, 2023 at 10:08 am said:

       I hope it is: “Can’t we have a stinking beer without a DEI lecture from the Vassar Women’s Studies Department?”

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       • 

         Let the mutherfuker burn!, on June 16, 2023 at 10:16 am said:

         I love that they think they’ve put themselves in a damned if you do, damned if you don’t situation. They’re not of course, but that they think they are is funny.

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       • 

         Brent Nyitray, on June 16, 2023 at 10:19 am said:

         The critical part is that this begins the defunding and breaking of the Woke Cartel.

         The risk / reward ratio of performative wokeness and leftism in general has changed.

         What I can’t wait for is the shareholder lawsuit alleging a breach of fiduciary responsibility over prioritizing the CEI index over the fundamental business.

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2. 

   jnc4p, on June 16, 2023 at 12:40 pm said:

   This may prove interesting:

   “In 2015, Nomani treated Muslim demands for a school holiday on Eid al-Adha as an example of “creeping Shariah.” Now she was aligning with parents who insisted that their kids be allowed to opt out of school assignments that went against their religious values. But what seemed like an obvious contradiction to me made perfect sense to her: Once again, she saw herself struggling against a malign and totalizing ideology. Wokeism, she told me, “is more of a danger to all of our societies than Islamism. Especially when it comes to the kids.” Islamism, she said, “is not seeping into our K-12 system. But wokeism is.””

   “The New Republican Voters
   A Muslim man went to a school board meeting last fall. He left supporting Donald Trump.

   By Aymann Ismail
   June 16, 20235:45 AM
   …
   I asked Aoun if he thought Republicans had the interests of American Muslims at heart. Weren’t they poised to nominate Donald Trump again, who famously said “I think Islam hates us,” and enacted a ban on Muslims entering the country? Aoun blamed the media, and again shared an anecdote. “I drove into Indiana. My wife goes, ‘You came all the way here, but these people probably won’t like you.’ But they welcomed us with open arms. She thought they were prejudiced. But they really called me to come down here, three hours’ drive, just to show my face for like about an hour,” he said. “I love to do things where I’m trying to get all kinds of cultures together.”

   “I’ve had Jewish people reach out to me, saying ‘I’m Jewish from New York, and the Jewish community here really appreciates you,’ ” he told me. “I was stunned. There are people who I thought would be the most racist people toward me, but they’ve reached out to me. I’m surprised. Maybe this can bring us together?””

   https://slate.com/human-interest/2023/06/pride-protests-republicans-protests-muslims-michigan.html

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   • 

     Brent Nyitray, on June 16, 2023 at 4:43 pm said:

     This is where the left’s open borders policy is going to bite them in the ass.

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