⭐️ This is the focus of the May FOMC that Brother Pow is paying attention to ‼️
In conclusion, the FOMC in June is hundreds of times more exciting than May ‼️
Pow has almost factored in interest rate hikes of 0.25% in the May FOMC. This became the terminal rate in June, and the focus has already shifted to whether interest rate hikes will finally stop.
Also, there is a surprise production cut in the Middle East, and the impact will come out after May, and attention is being paid to how to determine the labor market that is still strong and issue an SEP (economic outlook) at the June FOMC. Let's be prepared that the possibility that the 5.1% terminal rate issued by the March FOMC will be revised upward is not zero either.
Now, at the end of April before the FOMC, an important index called the “employment cost index” is about to be announced once every 3 months, and I would like to emphasize that if this is strong, it is a factor that will increase the possibility of interest rate hikes in June. There isn't much focus on other media, so I'm going to share it with you here. This is an excerpt from my humble book “Super Discussion Series,” which was published in a note at the end of the year, and the following shows which items in the labor market the Fed is paying particular attention to.
“I'm talking about what components have broken down the labor market, but Pow arranges the elements I can think of all at once below. “Payroll Employment (employment statistics), Job OpeningsRate (recruitment ratio), Hires Rate (recruitment ratio), Firms Planning to Hire (number of companies scheduled to be hired), Jobs Availability (number of job information), Quits Rate (retirement rate), Firms Unable to Fil Employment (vacancy rate for recruitment), Unemployment Rate (Unemployment Rate) Prime-Age Employment-Population Ratio (25 to 54 year old employed population ratio), Marginally Attached Workers (number of unemployed), Employed for Economic Reasons (number of part-time workers for economic reasons), Initial Unemployment How about “Claims (number of initial unemployment insurance claims), Employment Cost Index (employment cost index), and Average Hourly Earnings (average hourly wage)”? It seems that Pow has actually analyzed so many items on the employment situation in America, how the labor market is compared to before COVID-19, how it is now compared to the average value of the past 10 years, and verifying these and deciding how much to tighten monetary policy depending on how overheated it is. Also, among these, what seems to be an important factor that has a particularly large impact on the labor market is Pow, which is said to be ① Job OpeningsRate (recruitment ratio), ② Hires Rate (recruitment ratio) ③ Firms Unable to Fil Employment (vacancy rate for recruitment), and ④ Employment Cost Index (employment cost index).” The employment cost index, which is one of these four most important elements, is a rearview mirror indicator, yet again emphasizes that the Fed places more importance on it than we think.
Well, it's a bit off the rails, but what is Grandpa Pow implying this time around?
As was quietly mentioned in meeting minutes and annual reports, if sales schedules etc. of mortgage secured bonds are hinted at in QT as part of the new tightening, interest rates will rise, and it will be a factor in short-term stock price declines, so be careful.
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