June 27th FOMC Follow-Up

Share this Post:

Rates

  • The FOMC voted yesterday to increase the federal funds target rate by 75 basis points to a range of 2.25 – 2.50%. This decision was unanimous despite some prior reporting in the press that Kansas City Fed President Esther George might dissent from the decision as she had at the June meeting.
  • The decision for a 75 basis point hike comes on the heels of a volatile period in which June CPI unexpectedly peaked to 9.1%. This led market participants to price in a high probability of a 100 basis point hike before Fed officials talked markets back down to 75 basis points just ahead of the required “quiet period” before yesterday’s meeting.
  • Chairman Powell indicated the Committee views the new federal funds target range as having reached a neutral level but anticipated the need to continue with additional hiking until rates reach at least a “moderately restrictive” level.

Fed Balance Sheet

  • Yesterday’s FOMC decision continues the Fed’s balance sheet runoff plan that was first communicated in May. For July and August, the Fed is allowing maturing Treasury assets in excess of a $30 billion monthly cap, and agency debt and mortgage-backed securities in excess of a $17.5 billion cap, to roll off the balance sheet.
  • In line with this plan, beginning in September, the Fed will double the amount of assets that are allowed to roll off the balance sheet on a monthly basis.

Economic Conditions

  • Since the Fed published its Summary of Economic Projections in June, inflation has come in higher and economic activity has come in weaker than expected.
  • The Committee led yesterday’s statement by highlighting that “Recent indicators of spending and production have softened,” while also noting that “job gains have been robust in recent months, and the unemployment rate has remained low.”
  • Powell stated in the press conference that some softening in labor markets is probably necessary to get inflation back down and indicated he doesn’t believe the US economy is currently in recession.

The FOMC is next scheduled to meet Sept 20-21, 2022

Disclosures

The views expressed herein are those of Asset Consulting Group (ACG). They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. This report was prepared by ACG for you at your request. Although the information presented herein has been obtained from and is based upon sources ACG believes to be reliable, no representation or warranty, express or implied, is made as to the accuracy or

completeness of that information. Accordingly, ACG does not itself endorse or guarantee, and does not itself assume liability whatsoever for, the accuracy or reliability of any third-party data or the financial information contained herein.

Certain information herein constitutes forward-looking statements, which can be identified by the use of terms such as “may”, “will”, “expect”, “anticipate”, “project”, “estimate”, or any variations thereof. As a result of various uncertainties and actual events, including those discussed herein, actual results or performance of a particular investment strategy may differ materially from those reflected or contemplated in such forward-looking statements. As a result, you should not rely on such forward-looking statements in making investment decisions. ACG has no duty to update or amend such forward-looking statements.

The information presented herein is for informational purposes only and is not intended as an offer to sell or the solicitation of an offer to purchase a security.

Please be aware that there are inherent limitations to all financial models, including Monte Carlo Simulations. Monte Carlo Simulations are a tool used to analyze a range of possible outcomes and assist in making educated asset allocation decisions. Monte Carlo Simulations cannot predict the future or eliminate investment risk. The output of the Monte Carlo Simulation is based on ACG’s capital market assumptions that are derived from proprietary models based upon well-recognized financial principles and reasonable estimates about relevant future market conditions. Capital market assumptions based on other models or different estimates may yield different results. ACG expressly disclaims any responsibility for (i) the accuracy of the simulated probability distributions or the assumptions used in deriving the probability distributions, (ii) any errors or omissions in computing or disseminating the probability distributions and (iii) and any reliance on or uses to which the probability distributions are put.

The projections or other information generated by ACG regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Judgments and approximations are a necessary and integral part of constructing projected returns. Any estimate of what could have been an investment strategy’s performance is likely to differ from what the strategy would actually have yielded had it been in existence during the relevant period. The source and use of data and the arithmetic operations used for calculating projected returns may be incorrect, inappropriate, flawed or otherwise deficient.

Past performance is not indicative of future results. Given the inherent volatility of the securities markets, you should not assume that your investments will experience returns comparable to those shown in the analysis contained in this report. For example, market and economic conditions may change in the future producing materially different results than those shown included in the analysis contained in this report. Any comparison to an index is for comparative purposes only. An investment cannot be made directly into an index. Indices are unmanaged and do not reflect the deduction of advisory fees.

This report is distributed with the understanding that it is not rendering accounting, legal or tax advice. Please consult your legal or tax advisor concerning such matters. No assurance can be given that the investment objectives described herein will be achieved and investment results may vary substantially on a quarterly, annual or other periodic basis. There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.

Gryphon Financial Partners shall not in any way be liable for claims and make no expressed or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in or omissions from them. This was created for informational purposes only. Gryphon Financial Partners, LLC is an Investment Adviser.

Share this post:

Leave a Reply

Your email address will not be published. Required fields are marked *

This website uses cookies to ensure you get the best experience.  Learn more

Skip to content