In a move that surprised absolutely no one, the Federal Reserve's interest rate setting body, the Federal Open Market Committee, met today and decided to... well, do absolutely nothing. It's as if they all gathered around a large mahogany table, exchanged pleasantries, and then collectively decided to take a nap.
Jerome Powell, the Federal Reserve Chairman, who seems to be on a quest to be the next Paul Volcker but ends up channeling more of a Captain Klink vibe, led the meeting. The FOMC held interest rates steady, leaving them in a targeted range between 5.25%-5.5%. For those keeping score at home, that's the highest in some 22 years. And while this may sound impressive, let's not forget that the markets had fully priced in this non-move. So, in essence, the FOMC met the very low bar of expectations. Bravo!
As Powell exited the meeting, a hot mic caught him exclaiming, "I'm trying daddy!" It's unclear who he was addressing, but one can only assume it was a plea to the ghost of economic past or perhaps a direct line to Volcker himself.
The FOMC's decision to hold rates steady was not without its drama. Documents released after the meeting suggest a bias toward a more restrictive policy and a "higher-for-longer" approach to interest rates. This revelation sent the S&P 500 into a minor tantrum, falling nearly 1%. Powell, ever the wordsmith, stated, "We're in a position to proceed carefully in determining the extent of additional policy firming." In layman's terms: "We're not entirely sure what we're doing, but we're doing it with caution."
Powell also mentioned the central bank's desire to see more progress in its fight against inflation. "We want to see convincing evidence really that we have reached the appropriate level," he said. It's almost as if he's waiting for a sign from the heavens, or perhaps just a clear economic indicator, to tell him he's on the right track.
The Federal Reserve's actions come at a delicate time for the U.S. economy. With oil prices nearing $100 a barrel, gas prices hitting $4 in 11 states, and the looming threat of a government shutdown, one might say the Fed has its hands full. Powell, in his infinite wisdom, stated, "Forecasting is very difficult." A groundbreaking revelation, indeed.
On the topic of the United Auto Workers strike, Powell declined to comment on the politics but did acknowledge the many unknowns surrounding its impact on the economy. Similarly, he noted the significant effect of rising energy prices on consumers and the economy. As for the threat of a government shutdown, Powell said, "It's certainly a reality that that's a possibility." A statement so vague, it's almost poetic. Maybe Powell should try to emulate Greenspan, noted for using many words to say nothing at all, rather than attempting to channel the BDE of Paul Volcker.
As we look ahead, the next FOMC meeting is set for October 31. And while October has historically been an absolutely great month for markets, with the current state of affairs, one can only predict fireworks. Whether those fireworks are a dazzling display of economic prowess or a dumpster fire remains to be seen. But one thing is for sure: Jerome Powell is still not Volcker.