Originally Published: November 2, 2022 2:00 PM ET
Updated: November 2, 2022 3:16 PM ET
The November 2022 Federal Reserve Meeting concluded with the Fed announcement out at 2 PM ET. Jerome Powell’s statements are something investors will hang on every word in order to gauge the stock market outlook for the rest of the year. Whether it’s decidedly more hawkish or dovish, this likely sets the tone for sentiment in the near term. Further details could also dictate how the market approaches risk-on assets like penny stocks.
November 2022 Fed Rate Hike Announcement
Leading into the Fed Meeting and FOMC announcement in November, most presumed a 75 basis point hike was highly likely. Recent CPI and PPI data continued keeping investors on their toes in hopes that peak inflation is close. The latest Q3 GDP data also alluded to no recession being in play at this time.[Read More] Best Penny Stocks To Buy? 7 Short Squeeze Stocks To Watch Now
Needless to say, there’s been plenty of volatility created by other events in the stock market this week. Employment data and earnings results are among the main influencers. The pace of the Fed’s balance sheet runoff is also a likely point f interest for the market to see how aggressive (or not) the Fed is being right now.
September’s Fed Meeting saw a more hawkish tone taken on inflation. Fed officials saw this figure coming in at 5.4% by the end of 2022. A read of 2.8% is expected at the end of 2023 and 2.3% for 2024. The Fed also raised its Fed Funds Rate target for the end of the year to 4.4%, 4.6% at the end of 2023, and 3.9% in 2024. The Federal Reserve also raised rates by 75 basis points.
Here’s a breakdown of the hot topics & takeaways from the FOMC announcement & details from the November Fed Meeting:
November Fed Meeting, FOMC Statement, & Interest Rate Hike Top 10 Takeaways
This is a developing story and will be updated as more data is released.
- FOMC raises rates 75 basis points as expected
- The Committee decided to raise the target range for the federal funds rate to 3-3/4 to 4%.
- The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.
- Continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that were issued in May.
- Conduct overnight repurchase agreement operations with a minimum bid rate of 4 percent and with an aggregate operation limit of $500 billion
- The aggregate operation limit can be temporarily increased at the discretion of the Chair.
- Conduct overnight reverse repurchase agreement operations at an offering rate of 3.8 percent and with a per-counterparty limit of $160 billion per day
- The per counterparty limit can be temporarily increased at the discretion of the Chair.
- Roll over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing in each calendar month that exceeds a cap of $60 billion per month.
- Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
- Reinvest into agency mortgage-backed securities (MBS) the amount of principal payments from the Federal Reserve’s holdings of agency debt and agency MBS received in each calendar month that exceeds a cap of $35 billion per month.
- Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons.
- Engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve’s agency MBS transactions.
Immediately following the FOMC November announcement, broader markets shot higher. The S&P 500 (SPY) went green for the first time during the session. The Nasdaq (QQQ) also got a boost thanks to dovish commentary from the November Fed Meeting statement. Several companies set to report earnings, including Marriot (MAR), PayPal (PYPL), and Qualcomm (QCOM), also trading higher during the afternoon session.
Now investors look to the next round of CPI/PPI data and rate hikes to see if things have begun turning a corning. Hopes that the Fed has begun slowing the frequency and size of rate hikes have brought some optimism to the stock market today. As Jerome Powell took to the podium, however, sentiment soon turned bearish once again. He didn’t not necessarily lean heavily on what was put out in Wednesday’s statement but worked more toward muting some of the market euphoria as the initial Fed statement was released. Most likely the next round of CPI data could bring additional data to weigh against today’s FOMC statement and Jerome Powell press conference. Below are a few of the highlights from that press conference.
Fed Chair Jerome Powell’s November FOMC Press Conference Highlights
Notable comments from Fed Chair Jerome Powell After November 2022 Fed Meeting
We will discuss specific commentary from the November Fed Meeting Press Conference hosted by Fed Chair Jerome Powell, which begins at 2:30 PM ET. A link to the Video version of that press conference is provided above.
- Job vacancies are still high
- The pace of job gains is slow
- Demand substantially exceeds the supply of available workers
- Inflation remains well-above the goal
- Recent inflation data has come in again higher than expected
- Financial conditions have tightened significantly and are seeing the impact in areas like housing but will take time to see that reflected
- At some point, it will become appropriate to slow the pace of the increases
- There is significant uncertainty around that level of interest rates
- incoming data suggest that the ultimate level of interest rates will be higher
- The bias right now related to the pace of rate hikes: the slowing pace could come as soon as the next meeting but no guarantee. Specifically said “That time is coming,” but unclear and data-dependant
- No sense that we’ve overtightened or moved too fast
- Any evidence that inflation becoming entrenched? Powell: No scientific model to say that inflation is entrenched
- How does Fed judge lag times? New literature says lags are shorter, but not enough data to pinpoint that timeline, and highly uncertain. It’s no more appropriate to think about lag times. Does not want to tighten too much or loosen too soon
- Wages are a mixed picture
- Signs of a gradual softening may be there but not obvious based on wages and wants to see vacancies & quits coming down
- How is Fed weighing international developments? There is close contact with other central banks to analyze global and geopolitical data to account for it
- Have the ability to support economic activity if it’s necessary in the case of overtightening
- Inflation picture is becoming more challenging and narrows path to a soft landing
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