Contracting Conditions

A major reason the Fed isn’t expected to raise the Fed funds rate this Wednesday is because financial conditions have tightened substantially. After peaking at almost 102 during early 2020, conditions eased to 97 by late 2021. They then rose to 101 in late 2022, to ease to 99.3 in mid-2023. Since then, they’ve steadily tightened and are almost 101. Since the September Fed meeting rates have effectively risen 75bps.