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We're past the what-if-recession days
What the Fed said recently
The July Fed meeting turned out to be a 25bps hike as expected, and in the press conference, Powell said that the staff thinks that “we do have a shot” at bringing down inflation levels while avoiding a hard recession (including significant job losses)
→ Just as recent as March of this year (after the SVB crisis), the Fed stated its forecast to a "mild recession" later this year, so the shift here (though not abrupt or all too unexpected) is meaningful and noteworthy
What the data says
Basically, we’re good.
US GDP (Q2) came in at a red hot 2.4% recently (much higher than the 1.8% expected figure), and the last time we saw a negative GDP was Q2 '22
Nonfarm payrolls data showed unemployment rate (July) at 3.5% early on this month — this is just above the lowest level since 1969, and we just might really be in this unique case where the labor market remains strong despite the Fed’s adamant series of hikes
This is from an article on Sunday - it says “but many banks aren’t convinced”, but I think this is just the start of a few more big names on the left column joining the names on the right column. Just a hunch…
I just feel like…
If inflation is starting to cool down in the US (and continues to do so) even after the Fed did not hike in June (and then a hike in July), I feel like the Fed will likely hike maybe one more time (or two at most). Labor market remains strong, inflation’s cooling down, there’s probably no harsh reason to suddenly aggressively hike or cut. But, as always, we shall wait and see what more data we get…
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