Recap of 9 Fed rate hikes March 2022-23. Is inflation fight working?
The Fed inflation fight continues today despite bank crisis.
Since this month last year, the Fed hiked overnight bank-to-bank lending rates to 5% using 9 straight hikes totaling 4.75% in 2022-23 as follows:
+0.25% March 22, 2023
+0.25% February 1, 2023
+0.5% December 14, 2022
+0.75% November 1, 2022
+0.75% September 21, 2022
+0.75% July 27, 2022
+0.75% June 15, 2022
+0.5% May 1, 2022
+0.25% March 15, 2022
They’re hiking rates to squash inflation, and they continued today, even in the face of the bank crisis.
This crisis was partly triggered by rapid increases in the Fed’s overnight bank-to-bank lending rate, which makes it to where banks have to pay out more on deposits.
This higher deposit cost came at a time when the loans on many banks’ books — from which they collect interest to make money — have rates lower than the rates they need to pay on deposits.
Also some banks, including Silicon Valley Bank, bought long term bonds as a supposed safety hedge. And when those bonds sold off as the Fed hiked rates, the value of those bonds declined and created losses.
The Fed, Treasury, FDIC, and OCC have helped to slow bank panic.
And the Fed still needs to deal with high inflation.
So in their thankless job, today’s hike is a line in the sand, and credible to inflation fight supporters.
Here are the key inflation numbers:
– Headline CPI inflation peaked 9% in June 2022, and while the latest CPI of 6% as of February 2023 is lower, it’s still way above the Fed’s 2% target.
– As for Core PCE inflation, which influences the Fed most, it peaked 5.2% in March 2022, and the latest is 4.7% as of January 2023.
This is also still too high for the Fed inflation fight to end.
As for mortgage rates, 30yr rates peaked October 10, 2022 at 7.375%.
Now mortgage rates are closer to 6.625% as of today.
Also, mortgage bonds have responded well to today’s Fed move.
If this mortgage bond rally holds, mortgage rates will drop more.
And unemployment for February was 3.6%, near 50-year low.
– Here’s a recap of Feb CPI inflation: 6% overall and 5.5% Core (TheBasisPoint)
– Here’s today’s median home price & affordability math (TheBasisPoint)
– Here’s the Fed’s statement for March 22, 2023
– Core PCE inflation for February, which the Fed follows closely, will come out March 31, 2023