Thursday, May 05, 2022

YESTERDAY'S DAILYFX

Intro: May Federal Reserve Meeting, Rate Decision
Christopher Vecchio, CFA, Senior Strategist
 
 

Fed Rate Hike Cycle Set to Accelerate

There was been a discernible shift in tone among Fed policymakers since the start of April. Whereas most officials believed that a 25-bps rate hike would be appropriate in May, recent inflation data spurred a more hawkish shift in rhetoric, with several FOMC members openly advocating for a 50-bps rate hike – and one has even talked up the possibility of a 75-bps rate hike.

After the Fed raises rates by 50-bps in May, there are still 200-bps rate hikes discounted into early-2023. The 2s5s10s butterfly has traded sideways in recent weeks, suggesting that the market has retained its overall hawkish interpretation of the near-term path of Fed rate hikes. Focus remains more on the Fed and less on Russia’s invasion of Ukraine

Rate Hike Timeline

Fed fund futures have remained very aggressive in recent weeks, with a rapid pace of tightening expected over the next three meetings.

 

 

Traders see a 100% chance of a 50-bps rate hike in each of May, June and July, with the main Fed rate expected to rise to 2.75% (currently 0.50%) by the end of 2022.

  • May 2022 = balance sheet winddown announced; 50-bps rate hike (107% chance)
  • June 2022 = 50-bps rate hike (142% chance)
  • July 2022 = 50-bps rate hike (133% chance)
  • September 2022 = 50-bps rate hike (90% chance)

We’ll discuss how markets may react to the May Federal Reserve rate decision starting at 13:45 EDT/17:45 GMT. You can join live by watching the stream at the top of this note

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FOMC: Decisions Regarding Monetary Policy Implementation

 
Here is the official statement: Press Release                                                                      
May 04, 2022

Implementation Note issued May 4, 2022

Decisions Regarding Monetary Policy Implementation

The Federal Reserve has made the following decisions to implement the monetary policy stance announced by the Federal Open Market Committee in its statement on May 4, 2022:

  • The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on reserve balances to 0.9 percent, effective May 5, 2022.

  • As part of its policy decision, the Federal Open Market Committee voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive:

    "Effective May 5, 2022, the Federal Open Market Committee directs the Desk to:

    • Undertake open market operations as necessary to maintain the federal funds rate in a target range of 3/4 to 1 percent.
    • Conduct overnight repurchase agreement operations with a minimum bid rate of 1.0 percent and with an aggregate operation limit of $500 billion; the aggregate operation limit can be temporarily increased at the discretion of the Chair.
    • Conduct overnight reverse repurchase agreement operations at an offering rate of 0.8 percent and with a per-counterparty limit of $160 billion per day; the per-counterparty limit can be temporarily increased at the discretion of the Chair.
    • Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in the calendar month of June that exceeds a monthly cap of $30 billion. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
    • Reinvest into agency mortgage-backed securities (MBS) the amount of principal payments from the Federal Reserve's holdings of agency debt and agency MBS received in the calendar month of June that exceeds a monthly cap of $17.5 billion.
    • Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons.
    • Engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions."
  • In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve a 1/2 percentage point increase in the primary credit rate to 1 percent, effective May 5, 2022. In taking this action, the Board approved requests to establish that rate submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

This information will be updated as appropriate to reflect decisions of the Federal Open Market Committee or the Board of Governors regarding details of the Federal Reserve's operational tools and approach used to implement monetary policy.

More information regarding open market operations and reinvestments may be found on the Federal Reserve Bank of New York's website.

RELATED INFORMATION                  

Statement Regarding Plans for Reducing SOMA Holdings of Treasury Securities, Agency Debt, and Agency Mortgage-Backed Securities

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Federal Reserve Hikes Interest Rates by Half Point

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**** FOMC Press Conference May 4, 2022 ****

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Council Study Session - 5/2/2022

Two councilmembers are traveling and excused. The other five have no other questions or comments to add to what's on the Agenda for the regular meeting that follows this study session at 4:30 pm.
City Manager Chris Brady calls on Planning & Services Director Kusi Appiah to follow up on some details related to Item 6-a Ordinance
File #: 22-0181   
Type: Ordinance Status: Agenda Ready
In control: City Council
On agenda: 5/2/2022
Title: ZON21-00940 (District 2) Within the 3100 block of East Southern Avenue (south side) and the 1200 block of South 32nd Street (west side). Located east of Lindsay Road on the south side of Southern Avenue (2.4± acres). Rezone from Single Residence 9 (RS-9) to Multiple Residence 3 with a Planned Area Development overlay (RM-3-PAD) and Site Plan Review. This request will allow for a multiple residence development. Staff Recommendation: Approval with conditions P&Z Board Recommendation: Approval with conditions (Vote: 6-0) (Continued to the June 20, 2022 City Council meeting)
Attachments: 1. Presentation, 2. Council Memo, 3. Staff Report, 4. Ordinance, 5. Ordinance Map, 6. Vicinity Map, 7. Site Plan, 8. Good Neighbor Policy, 9. P&Z Minutes, 10. Submittal Documents
 
 
The screen grab you see is this presentation
Meeting Name: City Council Study Session Agenda status: Final
Meeting date/time: 5/2/2022 4:30 PM Minutes status: Draft  
Meeting location: Lower Council Chambers
Published agenda: Agenda Agenda Published minutes: Not available  
Meeting video:  
Attachments:
  • 1 record
  • Group
              
File #Agenda #TypeTitleActionResultAction Details
22-0590 2-aPresentationHear a presentation, discuss, and provide direction on the Parks, Recreation and Community Facilities Department budget, including the City's special events.  Not available
MEETING DETAILS
File #: 22-0590   
Type: Presentation Status: Agenda Ready
In control: City Council Study Session
On agenda: 5/2/2022
Title: Hear a presentation, discuss, and provide direction on the Parks, Recreation and Community Facilities Department budget, including the City's special events.
Attachments: 1. Presentation
 
>> HERE'S CONTRACT 4-a
Dollar-Limit Increase to the Term Contract for Contractor Building Maintenance Services as requested by the Parks Recreation and Community Facilities Department (PRCF)
DOLLAR-LIMIT INCREASE Year 5 by $3,500,000, from $2,700,000 to $6,200,000, based on estimated requirements
Lasers Concert GIF - Lasers Concert Lights GIFs
File #: 22-0581   
Type: Contract Status: Agenda Ready
In control: City Council
On agenda: 5/2/2022
Title: Dollar-Limit Increase to the Term Contract for Contractor Building Maintenance Services as requested by the Parks Recreation and Community Facilities Department (PRCF) (Citywide) The increase will provide sufficient funding for necessary repairs to Mesa City Plaza and Dobson Ranch Golf Course, as well as future building maintenance services required by PRCF, until the contract expires on 10/31/2022. The Parks Recreation and Community Facilities Department and Purchasing recommend increasing the dollar limit with Builders Guild Inc. (a Mesa business), Diamond Ridge Development, East Valley Disaster Services (a Mesa business), SDB Inc., Skyline Builders, August Building Company, LLC; BWC Enterprises Inc., dba Woodruff Construction; and Robert N Ewing General Contractor, Year 5 by $3,500,000, from $2,700,000 to $6,200,000, based on estimated requirements.
Attachments: 1. Presentation, 2. Council Report

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City Council Meeting - 5/2/2022

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Powerful States | Noam Chomsky

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