12/18/23 Weekly Market Commentary

12/18/23 Weekly Market Commentary

December 18, 2023

What happened last week…         

The Federal Open Market Committee (FOMC) voted unanimously to keep interest rates at 5.25% to 5.50%, as expected. It is the third straight meeting rates were left unchanged. The final meeting of the year also noted that members of the FOMC expect potentially three quarter-point rate cuts in 2024 and possibly another four rate reductions in 2025. Fed Chairman Jerome Powell said, “Our policy rate is likely at or near its peak for this tightening cycle” and added that “while participants do not view it as likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table.” Regarding policy easing, Powell said, “I would say there’s a general expectation that this will be a topic for us looking ahead.” New York Federal Reserve President John Williams two days after the FOMC meeting said, “We aren’t really talking about rate cuts right now” but noted, “It is looking like we are at or near that in terms of sufficiently restrictive, but things can change.” The next FOMC meeting takes place on January 25-26.

 

The Fed also updated its economic projections (comparable to its September projections). For its 2023 forecasts, change in real GDP was revised to 2.6% (up from 2.1%), unemployment rate of 3.8% (unchanged), PCE inflation of 2.8% (down from 3.3%), core PCE inflation of 3.2% (down from 3.7%). For its 2024 forecasts, projections are as follows: change in real GDP of 1.4% (down from 1.5%), unemployment rate of 4.1% (unchanged), PCE inflation of 2.4% (down from 2.5%), core PCE inflation of 2.4% (down from 2.6%).

 

The inflation rate year-over-year for November matched expectations as it decreased to 3.1% from 3.2%, making it the lowest reading in five months and far below last year’s peak rate of 9.1% that was reported in June. Meanwhile, the core inflation rate year-over-year for November also matched expectations as it remained at 4.0%, which remains the lowest reading in more than two years.

 

Happening this week…

On Wednesday, existing home sales for November are expected to decrease to 3.77 million from 3.79 million, which was the fifth straight monthly decline and the lowest reading since August 2010 (3.68 million). On Friday, new home sales for November are expected to increase to 685,000 from 679,000. The metric has alternated month-over-month increases and decreases since April.

 

On Thursday, the GDP growth rate (final estimate) for Q3 2023 is expected to remain at the 5.2% rate from the previous reading, which would make it the strongest reading since Q4 2021. The reading would more than double the 2.1% growth rate seen in Q2 2023.


Thanks for reading!

- The Rockline Team


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.