A strategist says there's a key element missing before the Fed will pivot.
As the Fed kicks off its two-day interest-rate setting meeting, the focus is on whether Jerome Powell & Co. stick to their hawkish tone or indicate the pace of rate hikes may slow down.
Certainly, there’s valid reason for at least slowing down, after another jumbo rate hike is delivered on Wednesday. Inflation at a headline level looks to have peaked, goods prices are starting to fall, the surge in commodity prices has unwound, and the housing market is deteriorating rapidly. The flow of funds data from the Fed show this — that the corporate sector is running a financial surplus, where internal cash flow exceeds investment. “In previous cycles a deterioration in this balance and dip into deficit has been a reliable indicator of recession. This is the point at which companies begin to have funding problems as they have to tap into external sources to maintain current expenditure.
The buzz The Fed might get distracted this morning by a hefty set of data releases, including the suddenly important job openings report. The vacancies-to-unemployment rate is a key indicator of labor market tightness, a new study finds.
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