Originally Published: September 21, 2022 2:00 PM ET
Updated: September 21, 2022 3:11 PM ET
The September Federal Reserve Meeting concluded today with the Fed announcement out at 2 PM ET. Jerome Powell’s prior statements echoed a hawkish tone. It will be interesting to see how hawkish or dovish things will be for the rest of 2022 following the September Fed meeting. Plus, details could suggest how the market approaches risk-on assets like penny stocks.
Fed Rate Hike Announcement
Speculation was abuzz this month. Will we get 50, 75, or 100 basis point rate hike? The August CPI data and August PPI data showed that peak inflation isn’t here yet, and concerns persist over prices. Reports from companies like FedEx (NYSE: FDX) and Ford (NYSE: F) brought more concerns. Each weighed in on the state of the economy as it related to the performance for the rest of the year.
When asked if the economy is going into a worldwide recession, FedEx CEO Raj Subramaniam said in an interview with CNBC’s Jim Cramer, “I think so. But you know, these numbers, they don’t portend very well…I’m very disappointed in the results that we just announced here, and you know, the headline really is the macro situation that we’re facing.”
Inflation and balance sheet runoff are in the spotlight as investors digest the latest from the September Federal Reserve meeting. This may be the biggest event in the stock market today. But it isn’t the only potential catalyst to account for this week. For more details on daily catalysts in the stock market, check out “Stock Market This Week: What To Watch 9/19-9/23.”
Here’s a breakdown of the hot topics & takeaways from the FOMC announcement & details from the September Fed Meeting:
Top 10 Takeaways From September Fed Meeting, FOMC Statement, & Interest Rate Hike
- Fed rate hike announcement: the Federal Reserve Raises Rates By 75 basis points
- FOMC votes 12-0 for fed funds rate action.
- Fed raises Fed Funds Rate target for the end of year to 4.4%, 4.6% at the end of 2023, 3.9% in 2024
- Fed Funds rate for 2023 set at 4.6
- Increased unemployment rate to 4.4% in 2023 with slightly higher expectations of 3.8% by the end of this year.
- Remain on track for balance sheet reduction
- Fed officials see inflation of 5.4% by the end of 2022, 2.8% at the end of 2023, and 2.3% for 2024
- Fed officials see 0.2% GDP growth at the end of this year, 1.2% for 2023, & 1.7% for 2024
- Fed says 1.25 percentage point of rate increases remain for the rest of this year and 0.25 percentage point rate hike in 2023.
- Interest rates rise to highest level since 2008.
At the time of the update, S&P 500 ETF (NYSEARCA: SPY) set at the $380 area, the NASDAQ ETF (NASDAQ: QQQ) at the $285 area, the Dow ETF (NYSEARCA: DIA) at the $304 area, and Russell 20000 Small-Cap ETF (NYSEARCA: IWM) in the $176 area.
Fed Chair Jerome Powell FOMC Press Conference Highlights
Notable comments from Fed Chair Jerome Powell After September 2022 Fed Meeting:
- Strongly committed to bringing inflation back to 2% goal.
- Continuing process of balance sheet reductions.
- Slower output growth weigh on business fixed investment.
- Housing sector has weakened significantly.
- Weaker economic growth abroad is restraining exports.
- Looking for “compelling evidence,” inflation is moving down and the pace of rate increases depends on the data.
- Reducing inflation will require a sustained period of slower growth.
- There is a possibility “we go to a certain level and stay there for some time.”
- Need to raise policy stance to a level that is restrictive.
- Job openings and quits are a good indicator of the labor market.
- Want to be at a place where real rates are positive across the entire yield curve.
- We are aware of what’s going on in other economies around the world and vice versa.
- Do the odds favor a recession? Doesn’t know the “odds of recession,” but there’s a very high likelihood that we’ll have below-trend growth.
- People are seeing wage increases eaten up by inflation.
- Shelter inflation will remain high for some time.