What the Fed Said Today | Flip Flop TIME?

hey everyone me Kevin here okay so let's

do an update on what the FED just said

we'll keep it short so I read uh the

entire uh minute set as I usually do a

big one that I wanted to point out is

many participants noted many this was an

interesting line many participants noted

that one or more 50 basis point

increases in the target range could be

appropriate at Future meetings

particularly if inflation pressures

remained elevated or intensified

throughout the entire report numerous

times they mentioned how Russia is

likely to lead to increased inflation

expectations and of course inflation

increased inflation pressures the

biggest things for me though and I'm

just going to go through my highlights

really quickly they talk about a more

rapid pace of balance sheet runoff from

the 2017 to 19 uh period of time but

what's interesting is then we were doing

about 80 to 90 billion dollars of runoff

and now they were talking about hey some

participants talked about potentially

not having any caps maybe how we could

have high monthly caps in terms of how

much they actually run up but then they

said and participants generally agreed

that monthly caps of 95 billion dollars

would likely be appropriate so I'm like

that's barely more of a runoff than what

you did in 17 to 19. so that honestly

doesn't seem like that big of a deal now

it seems like they want to run

treasuries off more than mortgage

mortgage Securities the reason for that

in my opinion mortgage-backed Securities

is probably because mortgage rates are

skyrocketing and you've already got some

potential tightness coming to that

market and how much more do you really

have to tighten above and beyond

ordinary rates right they also talked

about how they're going to be some weird

things for them to evaluate because now

we have the repo facility that has a

bunch of cash in it and it's kind of

like hey we haven't tapered before and

it's with having this repo facility

which they didn't have in the last

episode okay that's not that big of a

deal obviously they pointed out this I

thought was a really interesting one I

put a big star on this one here they say

a couple participants commented that

increased uncertainty might lead

businesses and consumers to reduce

spending though their business contacts

currently were not seeing signs of such

shifts or a significant pullback in

demand that's a big deal because

throughout much of the report they're

talking about how hey there are upside

risks to inflation there are downside

risks that economic activity in other

words downside risks to the direction of

recession but upside risks to the

direction of inflations and we got to

fight inflation in fact our big goal is

keeping those inflation expectations

down right but the big thing that I've

been watching is like when are consumers

actually going to reduce demand I mean

I'm at an airport right now and it's

always freaking crazy when you're

traveling but as the FED here says we do

not yet see significant signs of shifts

or expectations of a pullback in demand

and so this is why earnings season which

starts in like a week and a half is

going to be huge because we're really

going to be able to determine how bad is

a shift in consumer demand actually

happening is is that even is there even

a shift right that's going to give us

big red flags for a potential recession

if we see something like that excuse me

so that's obviously a big deal uh okay

risk sentiment let the markets to come

down delinquency rates for mortgages uh

were stable this was an interesting One

credit card balances increased

significantly in the fourth quarter now

see that's another issue there that

could lead to lower demand for the rest

of 2022 because if you're maxing out

your buy now pay later if you're maxing

out your credit cards and you're

uncertain because there's a war and high

gas prices High food prices all of that

could lead consumer demand to come down

especially on those consumer companies

that appeal more towards lower income

individuals as well as upper income

individuals again that could be your

your Nikes your Lulu's whatever we'll

we'll see you know the Macy's and so on

and so forth uh okay another thing and

this I thought was really interesting as

well I put a big star on this one I

wrote listen to this one a few

participants judged that at the current

juncture a significant risk factor the

committee was facing was elevated

inflation and we know that but listen

this one and elevated inflation

expectations that could become

entrenched if the public began to

question the committee's resolve to

adjust the stance of policy as

appropriate to achieve the committee's

two percent longer run objective so

between you and me I think that means

they all got together during that

meeting and they're like yeah we're um

we're losing the people's Faith we're

losing the faith we've got uh we got to

deal with this after we have this

meeting we all need to get out there

every single one of us okay we're gonna

be like a team we're gonna get out there

all of us and we're gonna tell the world

how serious we are about getting

inflation down and even though that

sounds silly it works The Five-Year info

expectations peaked about a week ago

they've been coming straight down so so

far their work is working the the 10-2

yield curve has uninverted this is good

uh so so you know it's debatable as to

whether or not if you touch the

inversion and then you come back you'll

have a recession or not you know even

Kevin O'Leary when he was on my channel

the other day is like ah it has to stay

inverted for a while for it actually be

an issue anyway so they talk about being

Nimble the upward pressures blah blah

blah we've heard all this crap before

only one person voted for the 50 BP hike

the last time we know that

um based on sort of just giving you a

little bit more of a broad summary here

other than that wanting to be nimble the

the only time they talked about that 50

BP hike they really talked about they

also said this and I thought this was

great just remember earlier I read you

that quote about many participants noted

that one or more 50 basis point hikes

could be appropriate right listen to

this a number of participants noted that

the committee's previous Communications

had already contributed to a tightening

of financial conditions as evident in

notable increases in longer term

interest rates over months that's a way

of saying like hey

thinking about 50

. the job maybe

maybe so personally my belief hasn't

changed I think we're not going to see

50. that's just my bet I could be wrong

you know right now the market is is

pricing in like an 80 chance of a 50

basis point hike uh Market's obviously

not very happy uh to me the big buying

opportunity two two factors one

earnings forecasts come in strong if

earnings forecasts come in strong and

it's like no we're not seeing any

reduction in demand like people are

still spending like crazy because people

still have enough money or whatever

bullish second thing we get 25 BP in May

bullish and quite frankly I think we

will just because many are open to 50.

doesn't mean at a future meeting does

not mean more than half of them on the

committee are going to be willing to

actually vote for 50 in May I don't see

it happening even though the Market's

pricing it in but again the FED wants

the market pricing and more constriction

because that has actually would start

slowing the economy down and brings

hopefully inflation down a little bit so

they're trying to really run their yaps

and it's working because it's hurting

obviously the indices and such Why the

indices are moving down after this

meeting uh after these these minutes

were released honestly

who knows uh it's it like there was

nothing in this that was like really

scary if anything to me it was bullish

because they're like well we've kind of

already been achieving the tightening we

don't necessarily have to do 50 right

away you know what I'll do one more

thing I want to and I mean I read all of

it but you never know you could always

miss something I just want to see if

they mentioned the r word because I

didn't see it

no the r word was not mentioned so the

word recession was not mentioned the

word uh steady was mentioned three times

s-t-e-a-d I didn't put the Y in there

I'm trying to think of uh maybe rapid

would be another one rapid was mentioned

six times and that mostly has to do with

Tabor and rapid recovery from covid uh

oh yeah here you go more rapid removal

of policy support in the United States

incoming economic data and Federal

Reserve Communications LED investors to

expect a more rapid removal of policy

accommodation Market participants almost

universally expected at 25 BP hike the

last time around okay what whatever so

again to me bullish nothing's changed on

this I'm happy fingers crossed and I'll

keep buying the dead so uh cheers good

luck out there and make sure to get

yourself life insurance and it's almost

five minutes by going back kevin.com

life