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Market Update

Fed meeting dominates a busy week

September 25, 2023
  • amol dhargalkar headshot


    Amol Dhargalkar

    Managing Partner, Chairman
    Global Head of Corporates

    Kennett Square, PA


Wednesday brought us another FOMC meeting with the committee voting unanimously to keep the fed funds rate at the target range previously arrived at during July’s meeting (5.25%–5.50%). More notable than the expected outcome of holding rates steady, though, were the updates in the Fed’s Summary of Economic Projections, most significantly the Fed’s projection of interest rate policy for the next few years.

Higher for longer

Wednesday’s Federal Open Market Committee (FOMC) meeting confirmed that the Fed remains steadfast in its hawkish stance, keeping rates unchanged and projecting the median fed funds rate for 2024 increasing from 4.60% last quarter to 5.10%, effectively cutting the previously projected number of rate cuts for the next year in half. Powell’s data-dependent rhetoric remained consistent from the committee’s last meeting, maintaining that the FOMC bases their decision to hold rates steady upon “ongoing assessments of incoming data and evolving outlook and risks,” and that although inflation has cooled since mid-2022, “the process of getting inflation sustainably down to 2.00% has a long way to go.” 12 officials at the meeting projected another hike in 2023, while seven did not, reinforcing Powell’s conservative sentiment that the committee is still actively working towards the coveted “soft landing.” Following the FOMC meeting on Wednesday, U.S. stocks slumped, logging their lowest closing levels of September, with the S&P 500 falling 0.90%, Nasdaq falling 1.50% and the Dow Jones falling by 0.20%. U.S. Bond yields jumped though, with the two-year treasury approaching an almost 17-year high of 5.202% and the 10-year reaching 16-year highs on Thursday, hitting 4.49%.

U.S. dollar strengthens

The U.S. dollar index showed continued resiliency as it rose for its ninth straight week last week, with the growth of the economy fueling its longest winning streak in nearly a decade. This rally helped push the U.S. dollar to form a “golden cross,” a bullish technical trading chart pattern, occurring when a short-term moving average crosses above a long-term moving average. The dollar index's 200-day moving average was topped by the 50-day moving average, forming the milestone, which typically indicates that the dollar will continue to climb in the coming months. While good news for large multinational corporates earning income in the U.S. dollar, a stronger dollar could create pressure elsewhere in the global economy, as many commodities and debt instruments are denominated in U.S. dollar, becoming more expensive in local currency terms as the dollar strengthens.

Jobless claims near pandemic era lows

The number of jobless claims filed by Americans unexpectedly fell last week by 20,000, bringing the number to an eight-month low of 201,000, revised from 221,000 in the week prior. This number could be indicative of businesses showing a reluctance to lay off workers in an era of more intense labor shortages, however, the Labor Day holiday could be a caveat to this, and may have been responsible for the decline in claims, as it’s been shown that people tend to delay filing applications on or around a holiday. Before seasonal adjustments though, the number of actual claims was only 175,000 for the second week in a row, the lowest level since October 2022 and near the pandemic-era low. New jobless claims rose in 31 of 53 states and territories that report these numbers to the government, however, the number of people collecting unemployment benefits dropped by 21,000 to 1.66 million, the lowest level since the beginning of this year.

Home prices climb; home sales fall

On Thursday, existing home sales data was released, showing prices rising in the month of August and sales falling, likely due to the low inventory of homes for sale, increases in prices, and persistently high mortgage rates. This has created a barrier to entry that many would-be buyers cannot overcome. The median price for existing homes is up 3.9% from last year, from $391,700 to $407,100, an increase very much due to a lower inventory of unsold existing homes. Furthermore, August sales were down 15.3% from a year ago. National Association of Realtors chief economist, Lawrence Yun, said, “Home prices continue to march higher despite lower home sales. Supply needs to essentially double to moderate home price gains.” With mortgage rates hovering around 7.18%, homebuyers who locked in a low rate during the pandemic have been reluctant to sell, furthering the lack of supply and demand.


The flash U.S. manufacturing and services PMI data was released Friday morning, with the Services PMI down fractionally, from 50.2 to 50.1, indicative of a decline in production and weak demand, with companies noting high rates. Manufacturing purchasing managers’ index added one point in September coming to 48.9, up from 47.9 last month. This is still representative of a contraction, signaling stagnation in output as Q3 draws to a close. “September data indicated the worst performance across the private sector since February,” the report detailed.

Looking Forward

With ten committee members anticipating rates remaining above 5% in 2024, it may seem difficult for market participants to get a sense of what capital markets are going to be doing in the future. There continue to be concerns that the Fed’s aggressive stance on raising rates will negatively affect growth, tipping the economy into a recession. Given the strengthening of the U.S. dollar though, it will behoove corporates with exposure to global currencies to bolster their FX hedging programs or even start a program, while the dollar is continuing to trend upward. Next week brings consumer confidence reports, revised GDP, and PCE data to round out the month of September.

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