Morning Report: More hawkish Fed-speak

Vital Statistics:

Stocks are flattish this morning on no real news. Bonds and MBS are down.

St. Louis Fed President James Bullard made some hawkish comments yesterday, saying the Fed might need to hike another 50 basis points. “The risk with inflation is that it does not turn around and go back to a low level…As long as the labor market is so good it is a great time to get this problem behind us and not replay the 1970s.”

San Francisco Fed President Mary Daly said that the Fed remains “data-dependent.” “We have to be extremely data-dependent, and that’s why, even three weeks in advance of the meeting, our next meeting, it’s still a lot of time to collect information before we make a decision about what to do in June or what to do for the rest of the year,” Daly said in a virtual appearance before a gathering held by the National Association for Business Economics and Banque de France. Daly said “it’s a distraction really, to say what we’re going to do necessarily in June” and that attention is better focused on what the Fed is looking at to drive its policy choices. “Meeting-by-meeting decisions become really the most prudent path” for central bankers right now, she said.

Home improvement retailer Lowe’s reported soft comp sales on falling lumber prices and weakening demand for discretionary items. With the housing market so starved for inventory, you would expect to see more consumer interest in upgrading their current residences.

There still isn’t a deal on the debt ceiling, but talks are productive, according to comments from House Speaker Kevin McCarthy and President Biden. Even if the government doesn’t raise the debt ceiling, the chance of the US missing payments on its debt is remote. The government can always prioritize interest and principal over other spending.


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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