A Bloomberg recession model, which is based on several Fed manufacturing and business outlook surveys, shows that a recession is very likely by the second half of 2023. In related news, several Fed officials say the U.S. needs to hike interest rates throughout next year to help curb inflation. One expert says that this is or should be a wake-up call for investors. “This latest round of statements you’ve seen is a bucket of cold water,” Barings Investment Institute Chief Global Strategist Christopher Smart told Bloomberg. “It is a reality check.”

ZeroHedge/Simon White
US Recession: When, Not If

A signal based on the manufacturing indices compiled by the regional Fed banks indicates a recession next year. However, positive cyclical equity data suggests one is not imminent, while stock indices are not yet fully pricing one in.

Next year is set to be dominated by when the US will go into a recession, thus the more ways this question can be answered, the better.

Several of the regional Fed banks produce manufacturing and business outlook surveys for their region. Their releases are followed by the market to help build a more timely picture of what is happening at a national level, but they suffer from being very volatile, so are less reliable on a month-to-month basis.

You can read the full story, here.

Reuters via Yahoo Finance
Bullard: Fed has ‘a ways to go’ on interest rate hikes

The Federal Reserve needs to raise interest rates quite a bit further and then hold them there throughout next year and into 2024 to gain control of inflation and bring it back down toward the U.S. central bank’s 2% goal, St. Louis Fed President James Bullard said on Monday.

“We’ve got a ways to go to get restrictive,” Bullard said in an interview with MarketWatch, as he restated his conviction that the Fed’s target policy rate needs to rise to at least a range between 5.00% and 5.25% from the current level of 3.75%-4.00% to be “sufficiently restrictive” to reduce inflation.

Once at a high enough level, rates would then “have to stay there all during 2023 and into 2024” given the historical behavior of inflation, Bullard said.

You can keep reading, here.

Business Insider/Theron Mohamed
The Fed just crushed hopes of rate cuts anytime soon – and the US economy will suffer stagflation next year, a top strategist says

Federal Reserve officials have dashed investors’ hopes of an early end to the war on inflation, and a prompt pivot from hiking interest rates to cutting them. Instead of rebounding, the US economy will shrink and face stubborn price increases next year, Christopher Smart has said.

Two of the Fed’s regional presidents, John Williams and James Bullard, warned on Monday that the inflation threat hasn’t faded. The US central bank may have to lift rates higher and keep them there throughout next year to curb soaring prices, they said.

“This latest round of statements you’ve seen is a bucket of cold water,” Smart told Bloomberg on Tuesday. “It is a reality check,” Barings’ chief global strategist continued, noting investors have repeatedly shrugged off the Fed’s hawkish messaging in recent months.

Read the full article, here.

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