As mentioned Friday in our preview post, Jerome Powell chair of the FOMC and the rest of the voting members released their updated public press Economic Review and analysis mid-week last week. This release also included 30 minutes post Q and A along with a prepared discussion by Powell that lasted about 15 minutes.
Just by chance finding myself on the road for a slightly unusual 90 minute journey that occurred exactly during the time Jerome Powell was speaking, I was able to listen to the entire speech live, while I’m not sure if it was the subject matter, or a minor dental procedure the day before, no matter … I found it extremely difficult to stay awake while driving – digressing here, but if you weren’t on the edge of your seat listening to the speech and reading the press release … you’re likely in good company as we usually find this material extremely interesting – still digressing.
Jerome Powell is most open to reveal something either by accident or on purpose during the Q&A as the prepared press release and the prepared remarks have so many eyes and advisers reviewing he’s certainly to say only what we are supposed to hear.
Wall Street and much of the media outlets took much of his comments to be more Hawkish (less friendly and more likely to raise rates sooner.) For the record, this is why we enjoy listening to these types of events ourselves, as we did not find anything more than doing what he and the rest of the FOMC had promised to do, all along.
The dot plot which as a quick reminder, is an estimate of all board members including non-voting members timing and amount of where interest rates and where they expect economy to be was also released.
The following… Shows that multiple board members are more eager to raise rates sooner than they had been in recent quarters. In our minds this is good news as we would rather the FOMC not stay too low to long encouraging reckless behavior in the form of leverage and over leverage. Also encouraging for more conservative and cash investment such as our checking accounts an increase in rate will give us collectively some income on those reserves.
The Dot Plot Thickens
6-16-21 Dot Plot
Two Members Now Expecting two increases in 2022 with five members also expecting one move for a total of seven members expecting moves in 2022!
Expectation by three Members of One interest rate increase and one member expecting two moves in 2022
Again, we think higher rates sooner is a return to normal and sets us back on course for continued economic recovery… just keeping to their word!
With continued compliments for keeping my material short and to the point, a late viewing of the US Open Golf Tournament, thanks to a West Coast Venue and a desire to see what the so called Smartest Guys in the Room – Bond Guys do this week, this post is officially Part 1 … Will only be one more Part, Promise!
Have a Great “Dot Plot Analysis” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth