FOMC Recap: This Is FedCenter

 

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Hi there and welcome to a very special edition of FedCenter. We're thankful that you've joined us. Today is a special year-end review edition. We’ll be counting down the Top Ten Plays from this year’s FOMC Recaps, but before we get there, let’s dive into this afternoon’s game of the week which featured the Powell Rangers vs. the Market Memers.

 

This isn’t the first time these teams have met and on the season series it’s been all Market Memers.  The Memers have been on a tear of late, though they entered this game without star phenom HAWK (Tuah) coin, who has been suspended for the remainder of the season.  The loss of Hawk Tuah hasn’t had much impact on the Memers of late as FartCoin has been stellar off the bench.  Let’s face it the Memers team is loaded with a cast of all-stars like PNUT, Roaring Kitty (who has been killing it since his return from injured reserve), and Moo Deng among others.   

The Powell Rangers entered this matchup riding a losing streak dating back to September 18, 2024.  The Powell Rangers star, Jay Powell (aka J-Pow), has certainly doing his best to imitate Heisman winner Travis Hunter of late, believing he can play both offense and defense, but let’s face it his stats this year seem to indicate he’s been letting a few inflation players get right past him. 

Speaking of September 18th, the Powell Rangers haven’t shown up on defense since Miki Bowman, who her teammates describe as the “heart of this defense (against inflation)”  was solid in net, with a late game glove save to prevent a power play goal as time expired, with her decision to dissent.

Heading into the game Powell Rangers assistant coach NikiLeaks mentioned how the team was searching for identity, struggling with the loss of one of their start players “R-Star”.  

Vegas knew going into this matchup that Powell was going to have a tough facing his arch nemesis and one of the stars of the Memers, “Money Printer go brrrrr…”    

So let’s get to the highlights.

Out of the gates, The Powell Rangers took a shot and cut rates 25bps to 4.25% - 4.50%.  In drawing up their play the Powell Rangers cited “economic activity has expanded at a solid pace”  while acknowledging that labor market conditions have “generally eased” while inflation remains “somewhat elevated”.  Overall characterizing risks as more balanced.

It was typical Powell Rangers strategy of trying to skate where the puck is going to be while watching their flank.  This time Cleveland Fed President Beth Hammock stayed back on defense, dissenting.  After all it is the Cleveland Fed that is the Fed’s center for inflation research and that pesky player for the Memers, the Money Printer, is always ready to run right past Powell. 

The game progressed with the Powell Rangers being pretty stingy on defense in the second period, lowering the number of projected cuts to the 2025 Fed Funds rate by 50bps, pricing out 2 cuts relative to their last projections due to higher inflation projections, and slightly adjusting their longer-run Fed Funds neutral rate up to 3%.

At the second intermission it looked like the Powell Rangers had Market Memers on the ropes, with yields rising while equities and crypto were falling.

Entering the third period (the press conference), oddsmakers were wondering if the Powell Rangers would allow the Market Memers a comeback as the Memers would look for openings where the Powell Rangers might be making the same mistakes of the 1970s and be sticking to their notoriously inaccurate forecast?

The third period opened with the Memers taking a shot, looking for an opening in the Powell Rangers defense, with the typical attack focused on "Why did you cut today, if you expect inflation to remain above target next year?"   The Powell Rangers defense lead by J-Pow, was their usual skating around in a manner that utterly confuses the opponent while producing no tangible results.

The Powell Rangers coach played under a 5 prong attack which consisted of "growth is stronger, unemployment is lower, inflation is higher, we’re closer to neutral and uncertainty is higher” as a strategy to keep the Memers at bay.

Powell's defense even added a trick-play which he called in as "driving on a foggy night" as a way to keep the Memers off his tracks as he skated up the ice.

At one point during the third period, Rangers star J-Pow seemed to lose track of the play call, failing to find the data during a question and shuffling papers repeatedly.  Powell almost lost the puck on a few occasions, but the Memers failed to capitalize on the Rangers few openings and couldn't find much of a "dovish" opening that would have allowed them to put some goals on the board.

In the closing moments of the third period, the Memers had an opening, trying to run their "financial conditions" play, seeing if they could get the Rangers to give them an opening with a good old "Bitcoin" question, but the Rangers defense dumped the puck back down the other end of the rink.

The Powell Rangers seemed to be "in a new phase" in terms of their play calling relative to their last few games and it seemed to keep the Memers off guard.   J-Pow's late game defense even consisted of a Jedi mind trick where he said something like "there is no certainty.  It's actually a good thing that we know that we don't know exactly [where the neutral rate is]." as a way to combat the opposition, who promptly turned the puck over.

While skating off the ice with the upset in the books, J-Pow, said "the jobs not done" and we'll get inflation back sustainably to 2%.

We'll get interviews with all the Powell Rangers stars over the coming weeks.

Now turning our attention to the FedCenter Top 10 Highlights of Fed Watching in 2024 (courtesy of AI's reading of my FOMC recaps):

Number 10: The Man in the Orange Hat - Election Year Politics! Remember way back in January when the Fed was still hiking rates? Talk about a flashback! Turns out, our guy J-Pow is a Deadhead, and we're pretty sure he wasn't listening to "Sugar Magnolia" when he was staring down those inflation numbers. This was the year the author started worrying about those election year shenanigans, and he even channeled some Paul Volcker wisdom to remind us that politics and monetary policy don't always mix!

Number 9: March Madness Lessons: The Fed's Bracket is Busted! Springtime! Birds are singing, flowers are blooming, and the Fed is trying to figure out how to pull off a soft landing. Spoiler alert: it's about as easy as filling out a perfect bracket. Our author took us to school with this one, reminding us that the economy is a wild and unpredictable beast, and even the best-laid plans can go out the window faster than a Cinderella team facing a powerhouse.

Number 8: "Dark Matter" - The Unknowables of Monetary Policy! Things got a little existential in May when the author dove deep into the "dark matter" of economics. We're talking about all those hidden forces that nobody can really measure or predict. He even dropped some Pearl Jam lyrics to drive home the point! Clearly, uncertainty was the name of the game this year, and we're not just talking about the Fed's forecasts.

Number 7: Powell's 21 Questions - Obfuscation and Evasion! Time for some press conference shenanigans! Remember back in June when Powell faced a grilling from those pesky reporters? It was like watching a masterclass in dodging questions. Our author decided to translate for us, revealing the "questions behind the questions" that Powell just wouldn't answer. Let's just say, transparency wasn't exactly the Fed's strong suit this year.

Number 6: "Trade Deadline" - The Balancing Act Continues! July brought more FOMC drama, and this time the author compared it to the MLB trade deadline. Apparently, setting interest rates is a lot like building a championship baseball team – you've got to make tough choices, manage expectations, and hope you don't blow it all up. Hey, nobody ever said this Fed gig was easy!

Number 5: March Madness: The Fed's Playbook?   Apparently, the Fed can learn a lot from college basketball. "It is impossible to be perfect" and "plans are worthless, but planning is everything." Deep stuff. Someone get Coach K on the FOMC!

Number 4: "Got Debt?" - Fiscal Concerns Take Center Stage! Remember that awkward family Thanksgiving dinner where everyone argued about politics and money? Well, that was basically the FOMC meeting in November. Debt and deficits were the main course, and Powell even admitted that unsustainable fiscal policy was a threat to the economy. Our author was practically screaming "I told you so!" from the rooftops, warning about the dangers of financial repression and the erosion of the Fed's independence. Pass the gravy, please!

Number 3: September Surprise: 50 bps Cut and a Dissent! Now we're getting to the good stuff! Back in September, the Fed shocked everyone with a whopping 50 basis point rate cut AND a dissent from one of the Governors. Talk about a plot twist! This was the moment the author really started pounding the table about the Fed's dovish turn, and it set the stage for the rest of the year's easing action.

Number 2: Market Memers Bow Down, Allow the Powell Rangers to Skate the Clock Out! The tension was palpable as December arrived. The Powell Rangers, bruised and battered from a season of battling inflation, were clinging to a narrow lead. Suddenly, the crowd erupted! Whispers of "normalization cuts" sent those 2-year yields tumbling faster than a meme stock on a bad day. The Memers, caught off guard by the Rangers' unexpected agility, could only watch in disbelief as the bond market surrendered. Victory was within reach!

And the Number 1 Play: Powell Rangers Snatch Victory from the Jaws of Defeat! The final whistle blew, and the scoreboard lit up with a second consecutive rate cut. The Powell Rangers had done it again! They had faced down inflation, navigated a treacherous yield curve, and emerged victorious. Sure, there were a few stumbles along the way (that Hammack dissent had some folks scratching their heads), but in the end, they proved that experience and a little bit of luck can go a long way. The Memers, left wondering what just happened, retreated to their locker room, vowing to return next season with a vengeance. But for now, the Powell Rangers are hoisting the trophy, basking in the glory of their hard-fought win.