To where? My friend was contemplating on moving out of Silicon Valley to Texas. He found out Texas offered cheaper rent, cheaper food price, as well as cheaper salary. So in the end, he decided to stay put because California at least offered better weather.
The Fed is fighting inflationary fiscal policy with monetary policy. It's like bringing a pea shooter to a knife fight. Of course a 5.25-5.50 policy rate is too low to force down inflation by much. The current policy rate is the same as Larry Summers suggested, at the outset, would be necessary. (Likely Phillips curve* inspired.) At the time, I was quite certain that Summers was underestimating what it would take to cause a recession in the face of large fiscal stimulus. You can either do this slowly or with more urgency. Quickly, by the monetary policy route, would take close to a double digit policy rate, double what Summers suggested, and double pain plus a year or more... There are more effective options, and probably better. The most powerful are all fiscal (tax rates!). These effective measures are politically unpopular or would step on the wrong toes, as seen from the perspective of those to whom the toes belong, i.e., campaign contributors. _________________ *https://www.stlouisfed.org/open-vault/2020/january/what-is-phillips-curve-why-flattened
marketwatch.com ‘Various’ Fed officials said they were willing to hike interest rates if needed, minutes show May 22, 2024 Federal Reserve officials indicated a willingness to raise interest rates again if inflation doesn’t cool off further, according to minutes of the April-May meeting released Wednesday. “Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate,” the minutes said. The Fed released a summary of their April 30-May 1 closed-door discussion three weeks after the meeting. At the meeting, the Fed voted to keep its benchmark interest rate in a range of 5.25%-5.5%, where it has been since last July. In their discussion, Fed officials expressed dismay about “disappointing” inflation readings, saying the most recent data “pointed to more persistence in inflation in coming months.” Kathy Bostjancic, chief economist at Nationwide, said the Fed has gotten “more tentative” about starting to cut interest rates. “The minutes not surprisingly showed that after the faster-than-expected inflation readings in the first quarter, Fed officials’ confidence levels had been shaken,” Bostjancic said. She said the Fed could still cut rates this year, if inflation does not reaccelerate and the economy softens. The earliest the Fed could move would be at the September meeting, which is her forecast, Bostjancic added. Minutes show Fed officials fretted that the cost of housing hadn’t slowed as much as they expected. Nor had the cost of labor eased as much as they were hoping. Those are two of the biggest sources of current U.S. inflation. What’s more, a steadily growing U.S., economy could keep consumer demand for goods and services sufficiently high to keep prices somewhat elevated, some Fed officials suggested. As a result, Fed officials “assessed that it would take longer than previously anticipated for them to gain greater confidence that inflation would move” toward their 2% goal. Still, Fed officials said they expected the economy to grow at a slower pace and help bring supply and demand back into better balance. Since that decision was announced, Fed officials have stressed in their public comments the need to be patient and keep rates steady for a longer period of time to ensure that trend inflation remains on the path back to the 2% target. This sentiment was reflected in the minutes. The need for patience in cutting rates stemmed from hot inflation readings between January and March. What wasn’t clear from Fed speeches, and was revealed in the minutes, is that these hot inflation prints caused “many” officials to worry that the level of the Fed’s benchmark rate might not be high enough to cool inflation. “Although monetary policy was seen as restrictive, many participants commented on their uncertainty about the degree of restrictiveness,” the minutes said. This uncertainty stemmed from the possibility that high interest rates may be having smaller effects than in the past, or that the so-called “neutral” rate of interest might be higher than previously thought, the minutes said. Officials also wondered whether the economy’s trend growth rate was lower than estimated. That means that there is some worry that the economy could be overheating, said Bostjancic. In their discussion of upcoming policy moves, officials talked about holding rates for longer should inflation remain sticky or cutting them in the event of unexpected weakening in the labor market. This was a more hawkish stance than at the prior Fed meeting in March, when officials ”judged that the policy rate was likely at its peak for this tightening cycle, and almost all participants judged that it would be appropriate to move policy to a less restrictive stance at some point this year if the economy evolved broadly as they expected. ” Since the May meeting, the April CPI data was released and was seen by many Fed officials as a relief after the strong inflation readings in the first quarter. Stocks DJIA SPX dropped after the minutes were released. The yield on the 10-year Treasury note BX:TMUBMUSD10Y didn’t move very much. It has been trading below 5% since shortly after Fed Chairman Jerome Powell’s May 1 press conference, which was seen as dovish.
But all 3 major indexes are registering new ATH on a daily basis, so what the hell does it matter whether Fed cuts the rate or not? I mean, do I really care? No. What about you? Do you care?
Looks like the Fed is just ignoring all the fiscal stimulus from the IRA. They don't seem interested anymore in raising rates. Even with that 275K NFP print I doubt they'll do anything. The labor shortage will not abate anytime soon so if you are looking for a drop in NFP numbers you'll be waiting for awhile. The most surprising thing to me listening to the prognosticators is they all believe housing costs will just magically go back to the previous trend. That is delusional thinking due to the ever rising tide of NIMBYs. Lets face it the local politicians will never go against the NIMBYs since the politicians themselves own real estate. Its the same problem in the rest of the Anglosphere. Toronto is an absolute joke where real estate prices are 10X median salary.
Never like to pay attention to these news policies, adhere to their own trading philosophy, with "0.01 hands "can basically achieve stable profits, the policy impact is difficult to estimate.