In a much-anticipated Federal Open Market Committee (FOMC) meeting on Wednesday, July 27, the Fed funds rate was once again bolstered by an additional 75 basis points in ongoing efforts to curb inflation in the United States. Regions Bank’s Chief Economist Richard Moody, Chief Investment Officer Alan McKnight, and Chief Market Strategist Brandon Thurber weigh in on the latest move.
“Stocks are reacting well to this news,” noted McKnight in a conversation with reporter Joe Rennison of the New York Times, who shared live updates on Wednesday: NYT: Fed Fights Inflation With Another Big Rate Increase: Live Updates. He went on to describe his view on the overarching theme of the current market as ‘better than feared.’
Coming out of earnings, especially from some of the big tech companies on Tuesday, things haven’t been as bad as some were expecting from the second quarter. Based on Federal Reserve Chairman Jerome Powell’s comments on interest rate hikes being data dependent, it seems appropriate that the Fed would slow down the recent pace of notably high increases.
“Powell’s comments gave the confidence to the market that the possibility for increases is still there, but perhaps could decelerate over the next few months following these two large increases recently,” according to McKnight. Though Moody noted that during the post-meeting press conference on Wednesday, Chairman Powell indicated that another equally large increase in September could not be ruled out.
Moody also noted that given the mixed messages in the economic data and considerable volatility in the financial markets, the Committee effectively did away with “forward guidance” and as McKnight noted also is, at least for now, very data dependent.
“It is clear that the FOMC has further to go in raising the Fed funds rate to help bring down inflation,” said Moody. “What is decidedly less clear is how much further the FOMC has to go, and how fast they’ll get to where they’re going.”
It is clear that the FOMC has further to go in raising the Fed funds rate to help bring down inflation. What is decidedly less clear is how much further the FOMC has to go, and how fast they’ll get to where they’re going.
Richard Moody, Regions Bank’s Chief Economist
So the question is, will the market rally last beyond today’s FOMC news?
“Investor sentiment has been quite negative over recent months and positioning was ‘light’ entering this quarterly earnings season,” said Thurber. “These conditions provided equities with a springboard of sorts on better than feared earnings reports and a data-dependent Fed; however, we experienced bounces of a similar duration and magnitude in March and May of this year that failed to be sustained.”
Thurber noted that he questions why this time would be different given continued uncertainty surrounding monetary policy and the geopolitical backdrop that is likely to weigh on consumer and investor sentiment.
For more on the potential market impacts of this week’s FOMC meeting and rate increase, join Moody, McKnight, and Thurber tomorrow for the Regions Weekly Markets Update Call at 11 a.m. Central.
If you want to catch up on previous week’s calls, visit Regions Weekly Market Update recordings. These events are hosted by Regions Wealth Management team. Additional economic commentary and resources may be found on Regions.com.
This week’s Weekly Market Update will be presented live at 11:00 CT / 12:00 ET on Friday as part of an ongoing weekly series hosted by Regions to share the latest insights on the markets.
Participants may send questions in advance of the call to [email protected] so the panelists can address these questions during the live call. Participants are encouraged to dial-in or join via WebEx 10-15 minutes in advance of the start time.
For additional information and link to join this and upcoming calls: Regions Bank Weekly Market Update Calls – WebEx.
The commentary expressed during this call are statements of the Speaker(s) opinion, are intended only for informational purposes, and are not formal or binding opinions of Regions Bank, its parent company Regions Financial Corporation, or its subsidiaries. This content is solely for information and educational purposes, and nothing contained in this presentation constitutes an offer or solicitation to purchase any security, the recommendation of any particular security or strategy or a complete analysis of any security, company or industry or constitutes tax, accounting or legal advice. Information is based on sources believed to be reliable but is not guaranteed as to accuracy. Commentary and opinions provided reflect the judgment of the Speaker(s) as of the date of this presentation and are subject to change without notice. Certain sections of this presentation may contain forward-looking statements based upon the reasonable expectations, estimates, projections and assumptions of the Speaker(s), but forward-looking statements are not guarantees of future performance and involve risks and uncertainties, which are difficult to predict. Investment ideas and strategies presented may not be suitable for all investors. No responsibility or liability is assumed for any loss that may directly or indirectly result from use of information, commentary or opinions. This information is intended for the use of Regions’ clients and associates and is not intended for further distribution.