The Fed’s Blackout Period and What To Expect

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What's Happening Today

We are entering what's known as the "blackout" period at the Federal Reserve, when policymakers stay quiet ahead of their next meeting, which is on Tuesday and Wednesday of next week. In that meeting, they will decide how much they will hike interest rates. Last week, investors got an indication from Fed Chair Jerome Powell that the bank was interested in "moderating" its pace of rate hikes going forward, giving everyone optimism that we might only see a hike of 50 basis points (half a percentage point). The previous four rate hikes have been 75 basis points.

Fed funds futures market data suggest traders currently believe there is roughly a 75% chance of a more moderate rate hike next week.

This week, we'll get a further glimpse of where prices are headed when the Producer Price Index (PPI) is released, which measures wholesale inflation. PPI is a useful leading indicator for us shoppers, because if wholesale prices rise, costs are often passed on to us in the stores.

The Fed's G.19 consumer credit report also comes out this week, which will indicate the financial strength of American households via household wealth and debt figures.

Stocks are falling today as investors digest the last round of corporate earnings and wait for a decision from the Fed. Friday's strong jobs report added to worries, as it suggested the labor market is still going strong despite the Fed's rate hikes. With the jobs market acting as a proxy for the U.S. economy, the strong report indicates that the economy isn't slowing down enough, which raises the likelihood that the Fed will continue to stay aggressive in its inflation fight.

- Kristin

Editors' Picks

Fed Could Pencil In Higher Interest Rates Next Year While Slowing Rises in December (The Wall Street Journal)

US Services Gauge Rises Unexpectedly on Business Activity Surge (Bloomberg)

Oil Prices Rise After OPEC+ Keeps Output Steady, Russian Price Cap Imposed (CNBC)

Oil Price Forecast 2023-2050 (The Balance)

The Fed's Rate Hikes Have Yet to Dent Hiring (The Balance)

When Does Social Security Pay Monthly Benefits? (The Balance)

Should I Buy Fixed-Income Assets If I'm Afraid of a Recession? (The Balance)

Term of the Day

OPEC

The Organization of Petroleum Exporting Countries (OPEC) is an organization of 13 oil-producing countries, and its decisions can have a significant impact on future oil prices.

The oil and energy ministers from the OPEC members meet at least twice a year to coordinate their oil production policies. Each member country abides by an honor system in which everyone agrees to produce a certain amount. If a nation winds up producing more, there is no sanction or penalty. Each country is responsible for reporting its own production. In this scenario, there is room for "cheating." A country won't go too far over its quota, though, unless it wants to risk being kicked out of OPEC.

Despite its power, OPEC cannot completely control the price of oil. Global supply and demand impact its price. Supply is influenced by exploration, production, and geopolitical influences that interrupt production and flow of oil from producers to consumers. Demand is dictated by consumers, businesses, and governments based on their needs for energy.

Off the Charts

Even though incomes are on the rise (thanks to the great job market), taking inflation into account, after-tax personal income has actually fallen 3% over the last 12 months as of October. Despite this, inflation-adjusted consumer spending is up 1.3% over the same period. In other words, we're making less, yet spending more.