Is It Wednesday Yet?
Submitted by Atlas Indicators Investment Advisors on March 15th, 2023
Wednesday Morning, 3 A.M. is the first album released by Simon and Garfunkel. The Sound of Silence is the last track on side one. This hit song is about the inability of people to communicate and all the difficulties that accompany it. America is facing such an episode now with our central bank.
Blackout periods precede each time the Federal Reserve gathers its Federal Open Market Committee (FOMC), the group charged with making monetary policies. They have been in such a period since Saturday until after the 12 voting members convene next Tuesday and Wednesday. With all the banking events that have happened since they went quiet, their silence in deafening.
While the Federal Reserve remains mum and unable to give a sense of monetary policy direction following the failure of two banks last weekend and the government offering a Bridge Over Troubled Waters, markets are making lots of noise. The Chicago Mercantile Exchange (CME) publishes probabilities of coming central bank changes to the overnight lending rate each day. On February 14th, the market priced in a 90.8 percent probability that a rate change next week would be up 25 basis points (0.25%). Then on the 7th of March, the odds moved to 69.8 percent that the move would be 50 basis points (0.50%). In both instances, there was zero probability that the Fed would not change at all. As of this writing, however, that likelihood of no change was 28.4 percent, down from 35.0 percent on Monday. And the 50 basis points move now has zero percent chance of happening according to the CME.
This coming Wednesday we’ll know more as the FOMC releases their decision. Fortunately, you won’t have to wake up at 3 A.M. Instead, they’ll make the announcement at a more reasonable time of 11 A.M. PDT. With all the Federal Reserve is dealing with these days (inflation stubbornly high and a recent run on a couple of decently sized banks), Jerome Powell wishes he could say, Last Night I Had the Strangest Dream. Instead, he’s got to deal with the fact that once again, The Times They Are a-Changing.
