This Week's State Of The Economy - What Is Ahead? - 28 April 2023

By: Taro Chellaram /Wells Fargo Economics & Financial Report/May 03, 2023

This Week's State Of The Economy - What Is Ahead? - 28 April 2023

Angels manager (and long-ago former Astros third baseman) Phil Nevin was ejected from the game by the first base umpire for arguing a called third strike on a checked swing by the batter.  Nevin continued to make his case with the home plate umpire and was thrown out again by the home plate ump.  I guess the point was to make sure that Nevin got the message that he was gone.  In much the same way as the home plate ump, the Fed is widely expected to raise the fed funds rate another 25 bps next Wednesday to make sure the economy “gets the message” after the Employment Cost Index (“ECI”) increased a hotter-than-expected 1.2% in Q1, suggesting compensation costs are not cooling as much as the average hourly earnings data indicate.

The interesting question will be whether that signals the end of rate increases for a while to give the Fed a chance to sit back and observe the impact of its handiwork, or does it increase rates again in the months that follow?  The growing consensus seems to favor the former over the latter, but we’ll see.

 




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