In this season of ghosts and goblins and other fantastical creatures, our politics and markets seem scarier than our imaginary demons. For a little levity and education, I have turned to ChatGPT for some AI inspired prose:
In the chambers of power, decisions are made,
Where the Federal Reserve plots a monetary crusade,
Interest rates rise like the moon's eerie glow,
In the world of politics, where fortunes ebb and flow.
They gather in suits, in a shadowy hall,
Aiming to balance the economy for one and all,
But their moves can be seen as a political play,
With whispers and debates like on Halloween's day.
The witches of Wall Street, with their potions and spells,
Watch as the rates climb, ringing economic bells,
A dance of uncertainty, a political masquerade,
As the ghosts of inflation refuse to fade.
In this season of tricks and treats, we stand,
Between fiscal policies and the market's shifting sand,
The Federal Reserve's choice, a spectral delight,
As we navigate this eerie financial night.
I expect you have heard the Fed is trying to “thread a needle” with the economy by raising interest rates to slow growth and reduce inflation, but not cause a recession. A nearly impossible task usually. Well, we’re at crunch time with that plan where the thread is passing through the eye of the needle.
Fed Chair Jerome Powell has said one more rate hike may be necessary before the end of the year. But market participants are calling his bluff and anticipating no more rate increases in 2023.
In addition to the market, some members of the Fed’s Open Market Committee, which decides on rate changes, are thinking of not raising rates. Atlanta Fed President Raphael Bostic recently commented that he doesn’t see the need for more rate hikes. Similarly, Philadelphia Fed President Patrick Harker said he thinks the central bank can stop raising rates.
The October inflation report didn’t appear to clarify the rates-inflation-economy debate, and that uncertainty precipitated a new drop in the markets. The September Consumer Price Index (“CPI”) report was a bit hotter than expected, but the devil was in the details. For example, the CPI showed a +51% annualized increase in hotel prices. The month before, hotel prices showed a -43% annualized drop. So, the CPI headline needs to be taken with a grain of salt.
The Fed has two meetings left this year in November and December. Perhaps Powell and his crew can navigate our eerie political night and sidestep the recession we have been hearing about like an ominous drum beat from the media. That is the current hopeful consensus among economic analysts.
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In any case – Boo! And a Happy Halloween to all.