The Federal Reserve raised short term interest rates 0.75% to between 3.0% and 3.25%.  The Fed projected the short term rate will be 4.25% by year end and 4.625% at the highest but will continue raising rates until inflation is under control.  Major stock indices had substantial declines as investors weigh the impact of central bank tightening on economic growth and stock valuations.  The value of the U.S. Dollar soared which caused commodities to decline.

Despite increasing inflation, Japan’s central bank chose not to raise interest rates and left the short term rate at 0% and the 10 year Treasury bond at 0.1%.  Japan then acted to stop the slide of the Yen, for the first time since 1998, by selling dollars and buying Yen.  The value of the Yen had fallen sharply against the dollar due to the U.S. raising interest rates and Japan not doing so.

The U.K. raised short term interest rates 0.5% to 2.25%, a 14 year high.  However, the government under the new Prime Minister Liz Truss cut taxes and passed energy subsidies which may prolong inflation.

Treasury bond yields rose with the 30-year bond at 3.613% and the 10-Year note at 3.689%.  30 year mortgage rates rose to 6.67%.  Crude oil fell to $79.09 a barrel and natural gas fell to $6.862 per MMBTUs.  The U.S. dollar index soared to 113.00.  Gold fell to $1652.00 an ounce.

In the economic numbers:

• The U.K. reported gross domestic product grew 0.2% in the month of June after falling 0.6% in June. 
  • Consumer prices rose 0.5% in August.  From a year earlier, prices have risen 9.9%, down from 10.1% year over year in July. 
  • Excluding volatile food and energy, prices rose 0.8%.  From a year earlier core prices have risen 6.3%.
• Japan reported for August:
  • Consumer prices rose 3.0% from a year earlier, up from 2.4% year over year in July.
    • Core prices, excluding volatile food and energy, were up 2.8%.
    • For the month of August prices rose 0.4%, down from 0.5% in July.
• The Commerce Department reported:
  • Housing starts rose 12.2% in the month of August and are down 0.1% from last August.
  • Permits for future housing starts dropped 10.0%, largely due to a drop in multi-family permits.
    • Single family permits dropped 3.5%.

• The Labor Department reported:
  • Seasonally adjusted first time claims for unemployment were 213,000, up from a revised 208,000 in the prior week.
    • The 4-week moving average of claims, designed to smooth out volatility, fell to 216,750 from a revised 222,750.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil was unchanged at 12.1MM BPD.
  • Natural gas storage rose 103BN cubic feet and is below the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs rose 3 to 602.  The number of active natural gas rigs fell 2 to 160.

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Thank you,

Loren C. Rex, CFP^®, MA                                                                     Erik A Smith, AIF®

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These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.