Didn’t do a pre-market video this morning, as any short-term technical signals can easily be blown out when the Fed announces its interest rate decision at 11am (pdt), and when Chairman Powell makes his followup statement and fields questions from the media.
Last night I commented on the recent data that should have the Fed feeling pretty good about not needing to spike the punch bowl at this point with too much feel-good stimulus; this morning’s data just added to that sentiment:
Mortgage purchase apps rose a solid 6% week-on-week (third increase in a row), while the August housing starts and permits numbers both exceeded the high-end of economists expectations.
Again, the Fed has all the ammunition it needs at this point to essentially hold tight, although you can nevertheless bet big on a .25% rate cut today.
All that cheery news aside, as I reported yesterday, some real stress has developed within the banking system. If you do a google search on, say, “repo rate spike”, you’ll discover links to dozens of fresh articles on everything from it’s nothing that a little tweaking (the NY Fed had to inject tens of billions two days in a row into bank reserves) or some new Fed facility can’t easily remedy, to it demands a massive new QE campaign or the end of the world is upon us.
Our view, for the moment at least, favors the former (although we’ll be paying close attention going forward). In any event, make no mistake, it’s a hot topic at the Fed meeting this morning and it’ll be front and center during the post-meeting press conference…