Rate Watch- Will Unemployment Ever Go Up?

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As expected, the Fed raised rates by a quarter point. The markets had priced in that move already and were more eager to hear what Powell had to say about the economy and its outlook.

He said the same thing he has always been saying: The Fed will be very data-dependent, they will be headstrong in their fight against inflation, and more rate hikes may be needed.

None of this was new. However, I did find something extremely fascinating and that was during one of the questions he answered.

Powell did mention that for the first time he, and the Fed members, are seeing disinflation. The markets (Dow specifically) came roaring back from down 500 to positive territory during those remarks.

Then the jobs report came out 2 days later. The economy blew expectations out of the water with new jobs added and the unemployment rate was the lowest it has been in decades.

The markets, in fear of Fed policy, gave up any gains of the week. Remember, the Fed wants to see the labor market weaken before they decide to reverse policy on rate hikes. A strong labor market means a strong consumer and that will put inflationary pressure on the prices of goods and services.

Something to put on your radar is the CPI report that is due on February 14^th.

Here is what’s in store for this week – we hear from a lot of Fed members.

Monday

• Nothing Scheduled

• International Trade Deficit
• Fed Chairman Powell Speaks at Economic Club of Washington
• Fed Vice Chair Barr Speaks
• Consumer Credit

• New York Fed President Williams Speaks
• Fed Gov Cook Speaks
• Fed Vice Chair Barr & Atlanta Fed President Bostic Speaks
• Fed Gov Waller Speaks

• Initial & Continuous Jobless Claims

• UMich Consumer Sentiment Index
• UMich 1yr & 5yr Inflation Expectations
• Fed Gov Waller Speaks
• Federal Budget Balance
• Philadelphia Fed President Harker Speaks

Chart Check
The 10yr went towards the support line I drew last week. With last week’s jobs report, it bounced back to the middle of the wedge. (mortgage rates move the same way the 10yr yield does)

 If we continue to ride within this wedge, we will soon be heading for a breakout. If CPI (inflation) continues its downtrend, we can bet that the breakout will be to the downside. Either way, expect volatility once a breakout is confirmed.