As expected, we got another 0.75 percentage point increase from the Fed yesterday — the fourth consecutive increase of such size. Markets whipsawed — rising after the initial hike announcement just to finish the day down.

Parsing JPow’s words

Investors analyzed every word from Fed Chair Jerome Powell to understand what he’ll do at the next meeting. Here are the highlights from his press conference:

• Good: “… at some point it will be important to slow the pace of increases. So that time is coming, and it may come as soon as the next meeting or the one after that. No decision has been made.”
• Bad: “We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.”

What does this mean? JPow has left the decision up in the air. They’ll do what the data says…

So, what does the data say? Too early to tell…

No one expects the Fed to stop raising rates by the next meeting (Dec. 14). What matters is how much they’ll increase by: 0.50 or 0.75?

Doesn’t sound like a big difference, but a 0.50 increase sends a signal that the Fed is ready to slow down and bring us to an eventual pause.

By the next meeting, they’ll have October and November’s economic data. Lots can happen between now and then.

Why aren’t they slowing down the pace yet? The Fed is afraid of repeating the same mistake of easing too early in the ‘70s — after which inflation shot back up.

• Recent strong economic data also gave the Fed more ammo to continue raising rates.
• Job openings unexpectedly jumped in September — showing a stronger-than-expected labor market.

Consumers: Rising rates have major impacts

Rate hikes raise the price of nearly all types of loans, including mortgages, credit cards and business loans.

• The median monthly mortgage payment has been up 40% since the start of 2022. That’s $558 less per month that could have been spent elsewhere.
• Considering dropping that additional streaming service or pushing off buying a new car? You’re not alone.

The days of near-zero interest rates are long gone. Watch those loans; it’s going to hurt for a while.