Wednesday's Markets Update (September 20, 2023)

20 Sep 2023 by rate3

On Wednesday, the Fed kept the rate unchanged but hinted at keeping it longer. The Nasdaq reacted by correcting sharply as traders' mood changed again from anticipatory to moderately negative. Bitcoin hovered slightly above 27K as bulls lacked positive signals to continue pushing it further. Other news: The SEC updated the 1940s Name Rule, and the GOP keep pushing against CBDCs.

Details

Fed kept the rate unchanged at 5.25%-5.5% (at a 22-year high) as was anticipated by most analysts. Other takes from the FOMC meeting:

Fed see the rate at 5.6% this year and at 5.1% in 2024 (higher than in the June's forecast - 4.6%)
2023 and 2024 GDP growth are seen higher: 2.1% vs June's 1% and (1.5% vs 1.1%;
PCE inflation was revised to 3.3% (vs 3.2%) but was kept at 2.5% for 2024;
The core 2023 inflation is expected lower (3.7% vs 3.9%) and unchanged for 2024 (at 2.6%);
The 2023 unemployment rate is projected lower at 3.8% (vs 4.1%) and 4.1% (vs 4.5%) in 2024.
Comment

Overall, Fed members' sentiment is clearly shifting towards keeping interest rates higher for longer, despite declining inflation, provided that the economy continues to perform well.

Crypto

SEC updated the Name Rule (clause within the Investment Company Act of 1940). It now applies to more funds, including those active in crypto. This means that funds must invest their money in a way that is consistent with their names, as understood by the average investor.
The House Financial Services Committee has advanced a bill that would prevent the Federal Reserve from issuing a central bank digital currency (CBDC) directly to individuals. The bill, introduced by Rep. Tom Emmer (R-Minn.), would also prohibit the Fed from indirectly issuing a CBDC through an intermediary.
Comment

Dirty Garry, after his public humiliation following the XRP ruling, appears to be withdrawing from his front-row seat, where he has actively suppressed innovation in the country. His seat is now taken by his henchmen, who do not hesitate to directly threaten anyone involved in the crypto industry with persecution. Meanwhile, some lawmakers continue their attempt to stop or at least delay the CBDC 1984 madness from happening. Ergo, the system of government must be changed ASAP by drastically reducing the power of executioners and bureaucrats.

Macroeconomics

UK inflation slowed to 6.7% in August from 6.8% in July, beating expectations of 7.0%. This was the lowest rate since February 2022, driven by slower food inflation and lower accommodation costs. Core inflation, which excludes volatile items like energy and food, fell to 6.2%, the lowest since March.

Comment

The UK has one of the highest inflation rates in Europe due to high food and energy costs. The fact that UK inflation is slowing down is significant, as it indicates an overall improving situation with food and energy shortages in the EU. This is likely due to entrepreneurs adapting to the new geopolitical situation by finding new suppliers and developing new technologies. The slowing of inflation in the UK is a good sign for the European economy as a whole, as it suggests that the region is starting to recover from the shocks of the war and the "quarantine".