The "Fed Rate" -- May 18, 2023

Locator: 44680ECON.

Headlines that the Fed could still raise rates one or two more times this summer.

The "jobless rate" plummeted last week. All things being equal: the Fed needs to raise rates based on that data point, at least from the Fed's / JPow's point of view.

Link here. 

Warren Buffett says he pays no attention to the "Fed rate." He said that most recently at the 2023 annual meeting.

If so, this is why:

In round numbers "we're" at 5%. With 25-bp increases each time, it would take ten more 25-bp hikes to get to 7.50%. [Yes, I know: that sentence has a redundancy, but .... ].

An alien from outer space would suggest that the jagged line going back to 7.5% this year would simply be expected, background white noise. This doesn't seem to be rocket science, even though the alien from outer space probably understands rocket science. 

The alien might ask about the "12-year era of 'free money.'"

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About That Jobless Rate

The "jobless rate" plummeted last week. 

Entirely unexpected.

Right, wrong, or indifferent, it's this data that is part of the information on which the Fed makes decisions.