September 26th 2023 Weekly Economic Update

A repeated phrase during last week’s Fed press event was “proceed carefully”, which likely confirms the view that some, but not all, committee members are concerned about the unknown lags with which monetary policy affects the economy. The Committee believes the last three inflation readings were good, but they are not yet convinced inflation will continue to trend downward. The labor market is getting into balance, but labor demand still seems to be stronger than the supply of available workers. In sum, investors need to watch job openings and the next few inflation prints to get a sense of future interest rate decisions. The Fed ultimately decided to keep rates unchanged this time around, but Powell and the Fed gave analyst plenty of speculation as to whether they will increase rates one more time this year at their next fall meeting. For the previous week, the market as a whole was down as investors priced in the potential for future rate hikes.