ALL EYES ON JEROME POWELL: The Fed Chairman is scheduled to make a major speech on Wednesday — he’s ready to signal that the central bankers will end their 75 basis point rate hikes; a half-point increase is likely at the Dec. 13-14 FOMC meeting. That’s the good news.
THE BAD NEWS is that the Fed hasn’t seen signs of a significant slowdown in the still-strong economy, and while inflation may have leveled off, it’s far from the Fed’s target of 2%. Thus we think Powell will make it clear this winter that more rate hikes, perhaps only 25 basis point moves, are likely well into 2023.
JUST BECAUSE THE FED IS MOVING AWAY from 75 basis point hikes doesn’t mean that the rate increases will end anytime soon. The Fed is still hawkish, as Powell will confirm on Wednesday.
BUT THERE ARE TWO MAJOR WILD CARDS that could keep market rates from rising much more: first, the rigid Covid restrictions in China that have ignited rare public dissent — not enough to dissuade Xi Jinping, China’s Dictator for Life, but enough to ignite concern in the West about economic weakness and the slumping price of oil.
SECOND, WE’RE ONLY A WEEK AWAY from key deadlines in the railroad workers negotiations. A strike probably would be brief, but sources close to the talks report there still isn’t agreement on the bitter issue of sick leave.
THE DEMISE OF DONALD TRUMP: On the heels of Sarah Palin’s loss last week in Alaska — and the re-election of Trump nemesis Lisa Murkowski — the ex-president faces still another election loss, as Herschel Walker stumbles in Georgia. So the pattern persists: Trump has become an albatross for Republican candidates.
TRUMP EMBARRASSED THE PARTY AGAIN this weekend by dining with a Holocaust denier. Most Republicans were silent, apparently fearful that condemning Trump would alienate the GOP’s hard-core base. But the most important Republican voters — independents and moderates — rejected Trump on Nov. 8 and they essentially are leaving the party.
IT’S IMPOSSIBLE TO EXAGGERATE the mood among Republicans we talked with during the Thanksgiving break. They were aghast that Trump would meet with known anti-Semites — and they want to move on, as Trump indictments loom in the next few weeks.
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