MARKET UPDATE: 9/15/2023

Inflation gives a mixed picture. The Fed considers their next move. Let’s jump in.

ANALYSIS

Headline inflation came in higher than expected on Wednesday, and the market reacted with an immediate tantrum, shooting rates up. But then traders did something crazy – they started analyzing the actual data. Turns out the main driver for the uptick was gas prices. When that was pulled out it wasn’t nearly as bad as originally thought. Rates stabilized immediately.

However, the last two days since then have not been good. Technical rate ceilings have been taking a beating. An optimist would say that shows a hard ceiling preventing rates from breaking higher. A pessimist could view it as “staging” for a breakout to even higher rates. Next week will tell…

WHAT’S NEXT

The Fed will announce next Wednesday if they are going to raise. The market is currently giving around 80% odds they pause for now. Potentially more important is the interview Chair Powell gives after the announcement. If they pause rates and he seems dovish, then we should see rate relief. The other way could test the ceiling.