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Bob Carey
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  US Economy and Credit Markets Ended June 17, 2022
Posted Under: Weekly Market Commentary

High inflation drove the Federal Reserve to declare a 75-bps increase to the target Federal Funds Rate – to a target range of 1-1/2 to 1-3/4 percent. Their statement added a new line voicing that the committee is "strongly committed to returning inflation to its 2 percent objective." Markets have very rapidly priced in higher rates amid elevated inflation readings. Understanding this year's rapid price changes is maybe most easily explained in review of the Federal Reserve Dot Plot. The December 15, 2021 FOMC Dots Median was 0.875 for 2022.  After the June 15, 2022 release of the FOMC Dots the 2022 now stands at 3.75.  This represents a striking increase of nearly 300 bps in just 6 months. Last week's economic reports included Tuesday's PPI reading for May showing an increase of 0.8%. Energy prices rose 5% for the month and food was unchanged. On a year over-year-basis, Producer prices are up 10.8%. This came on the heels of Friday, June 10's CPI reading; taken catastrophically by financial markets, which induced the Federal Reserve to raise rates higher than what they had previously guided too. On Thursday, applications to build US housing plummeted 14.4% in May and starts were off 3.5%. This was the steepest monthly decline since the start of the pandemic amid rapidly increasing mortgage rates. Last week's Friday Industrial Production registered a small rise of 0.2%, undershooting expectations of 0.4%. This was the fifth consecutive month of increased production; May powered by utility and mining output increases. Next Monday will feature a first-ever market close in honor of Juneteenth. Major economic reports (related consensus forecasts, prior data) for the upcoming week include Tuesday: May Existing Home Sales (5.40m, 5.61m); Wednesday: June 17 MBA Mortgage Applications (n/a, 6.6%); Thursday: June 11 Initial Jobless Claims (225k, 229k), June preliminary S&P Global US Manufacturing PMI (56.0, 57.0); Friday: June final University of Michigan Sentiment (50.2, unch.) and May New Home Sales (590k, 591k).
Posted on Tuesday, June 21, 2022 @ 8:34 AM • Post Link Share: 
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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