Fed tightening⦠spreads around the world⦠and FX intervention...The Fed delivered a 75 basis-point hike yesterday, and admitted there will b
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Fed tighteningâ¦Â spreads around the worldâ¦Â and FX intervention... Tight Fed The Fed delivered a 75 basis-point hike yesterday, and admitted there will be [below-trend growth]( for a period. Seema Shah of Principal Global Advisers says this should be interpreted as central-bank speak for "recession". The Dot Plot was revised higher, with FOMC members expecting rates to reach 4.4% this year and 4.6% next year. After the announcement, Goldman [raised their forecast](, now expecting a peak Fed Funds rate of 4.5% to 4.75%, from 4% to 4.25% previously.
Rates bonanza Central-bank action is also heating up across the Atlantic today. The Bank of England's Governor Andrew Bailey [will probably]( engineer a 50-bp rate increase today, though some analysts predict a 75-bp move â which would be the biggest since 1989. The Swiss National Bank raised [interest rates]( by 75 basis points to bring borrowing costs above zero for the first time in almost eight years, following recent moves in the euro region. Earlier, Norwayâs central bank raised its key interest rate by a half point. Yen intervention Japan [intervened]( in the foreign-exchange market for the first time since 1998, spurring a rally in the yen. Top currency official Masato Kanda said on Thursday that the nation had intervened in the currency market as the moves were sudden and one-sided. The move, coming amid a widening policy divergence with the US, indicates how a pain threshold had been reached as hedge funds kept adding to short bets on the yen. Dollar drops The dollar fell against all its Group of 10 peers except the Swiss franc. Stocks [wavered]( after a host of central banks followed the Fed with rate hikes. Europe's Stoxx 600 pared an early loss to trade 0.7% lower as of 5:36 a.m. New York time. S&P 500 futures swung to a gain after the benchmarkâs slide Wednesday took it more than 20% below the record high in January. This weekâs MLIV Pulse survey focuses on technology. Please [click here]( to participate. Coming up... Ok, the tsunami of central-bank meetings is receding, and longer-term traders will want to sit back and make sense of it all. Fortunately, the rest of the day is relatively light on the data front, with only US unemployment claims, the current account and the CB leading index to get through. Earnings include Costco, Accenture, FedEx, Factset, Darden Restaurants. The pace picks up again on Friday with PMI readings. What we've been reading Here's what caught our eye over the past 24 hours. - [Got $70,000]( to spare? Welcome to F1 Singapore.
- [To catch a predator](, try Twitch
- Jamie Dimon slams crypto as `[decentralized Ponzi schemes]('
- [Dr. Copper]( is not doing well
- [`Central Park Karen']( loses a lawsuit
- [Tom Brady]( says he deserves a shorter work week
- Time to [free Britney](...from her fans? And finally, hereâs what Joeâs interested in this morning I missed watching the Fed press conference yesterday (due to various other things going on), but one benefit of that is getting to read the transcript after the fact with fresh eyes, not influenced by what everyone is saying about it in real time. Of course, I did see that the stock market tanked again, so the hawkish message was clear either way. Anyway, reading through it this morning, there were three moments that really stood out to me, and each one of them deal with the centrality of the labor market tightness to the Fed's thinking. First, from Powell's introductory remarks where he notes that yes, there are clear signs of rate hikes having a slowing effect, but that labor market strength (or tightness) has remained stubborn. Activity in the housing sector has weakened significantly in large part, reflecting higher mortgage rates. Higher interest rates and slower output growth also appear to be weighing on business fixed investment, while weaker economic growth abroad is restraining exports. As shown in our summary of economic projections, since June, FOMC participants have marked down their projections for economic activity, with the median projection for real GDP growth standing at just 0.2 percent this year and 1.2 percent next year, well below the median estimate of the longer-run normal growth rate. Despite the slowdown in growth, the labor market has remained extremely tight, with the unemployment rate near a 50-year low, job vacancies near historical highs and wage growth elevated. Job gains have been robust, with employee -- employment rising by an average of 378,000 jobs per month over the last three months. The labor market continues to be out of balance, with demand for workers substantially exceeding the supply of available workers. The labor force participation rate showed a welcome uptick in August, but is little-changed since the beginning of the year. Next is a part where the kids might say that Powell said the quiet part out loud: You know, we're never going to say that there are too many people working but the real point is this: Inflation - what we hear from people when we meet with them is that - that they really are suffering from inflation. And if we want to set ourselves up, really, really light the way to another period of a very strong labor market, we have got to get inflation behind us. Finally, in response to a question of Edward Lawrence of Fox Business about how long Americans should be expected to feel pain, Powell basically said it all starts with wages: How long? It really depends on how long it takes for wages, and more than that, prices to come down for inflation to come down. It's always been the case that monetary policy mainly works by cooling demand, which means a trajectory of lower wages and fewer jobs. But now is making it crystal clear that the path to fighting inflation starts by hurting labor. If somehow inflation cools on its own, without a significant rise in the unemployment rate, well, that would be lucky. But it's definitely not the plan. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before itâs here, itâs on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals canât find anywhere else. [Learn more](. You received this message because you are subscribed to Bloomberg's Five Things - Americas newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox.
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