Fed Watch – 5/10/2024

The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.

Hello. Welcome to this May 10th, 2024 edition of Fed Watch. Thank you for joining us.

It’s a little bit more of the same this week. Some new data came out that shows that the economy is beginning to fray a little bit more around the edges, really extending on what we talked about about a month ago. The new automobile retail sales data showed additional weakness, the 112 ready to change. So the April data compared to a year ago, April was down 3.3%. The 1212 was still in Phase C, but that’s going to be deteriorating rapidly. And with the 112 down, that meant the data trend itself. The 12-month moving total actually fell in April, and that’s the first time that’s happened since we had the supply chain issues invoking an artificial decline in automobile activity during COVID. So there’s some noticeable weakness there. We saw some weakness also in durable goods, non-durable goods.

Wholesale trade, 112 is dropping below zero there also. So it’s more pronounced this week than it was last week or even the week before. So people are a little excited about what the Fed is going to have to say today about it. There’s no official pronouncements coming, just some Fed governors out there talking.

I’d still bet that we’re not going to see the interest rates come down before September. Going to read some more analysis on that. By the way, go to the ITR trends report, the May issue. I wrote an entire executive summary about what’s going on with those interest rates and a little bit more specificity because it’s in the trends report, but we’re still waiting for September before those interest rates we think start to come down.

Unrelated news, one of the little tidbit, the US dollar remained very strong through the first quarter using the broad weighted measure against their trading partners. And that means import goods are a little bit cheaper.And even with that, we’re not seeing the CPI come down. That’s further evidence that it’s all about the wages and the rents that are keeping that CPI elevated. And this too will change in our analysis. It will anyways. It’s just taking a little bit longer than we thought it was going to.

You’re still going to have a moment where you can strike on these interest rates out there, but it looks more like mid 2025 rather than early 2025 that’s just been pushed back because of the stickiness of these inflationary figures. It’s coming. And again, it doesn’t look like it’s going to be turmoil in the broader economy, and that’s part of why it’s taking its time getting here.

It’s coming, grab them when they get here, and enjoy the ride up on the other side because as you may have seen, we have quite a ride up in interest rates forecasted for post 2025 through the rest of this decade. So grab the interest rates when they’re here.

Thank you for watching this edition of Fed Watch.