What You Need to Know - November 2022

November 17, 2022

The latest insights from Commerce Trust on the economy, policy moves and market performance  

Economy. As expected, the Federal Reserve (Fed) issued the fourth consecutive outsized rate increase of 75 basis points at its November meeting. This latest hike brings the federal funds rate – the interest rate banks charge other institutions for lending excess cash reserves on an overnight basis – to a range of 3.75 to 4.0%, the highest level since 2007. We believe the Fed has made progress in its efforts to tame inflation as indicated by the October consumer price index (CPI) report and could lead to the central bank slowing the pace of rate increases going forward. 

Inflation. There are signs the U.S. price pressures could be easing after the biggest spike in inflation in 40 years. The October CPI report showed a smaller-than-expected increase in the cost of living, rising just 0.4% for the month. The yearly inflation rate fell to 7.7% from 8.2% for the previous month, marking its lowest level since January. Core inflation, which excludes food and energy prices, also came in lower than expected at 6.3% on an annual basis. 

Equities. October’s strong CPI report was good news for Wall Street and an indication many investors believe the Fed’s streak of oversized interest rate increases could be winding down. The S&P 500 Index soared more than 5% following the release of the Nov. 10 report to its biggest rally in two years. The index also has made double-digit gains since mid-October.

Treasury Market. A joint federal regulatory work group, including representatives from the Treasury Department and the Fed, launched a feasibility study to explore adopting an all-to-all trading model for the $24 trillion U.S. Treasury market. All-to-all trading would allow buyers and sellers to trade Treasury securities directly rather than relying on big banks to act as go between in the transaction, which regulators believe could improve market liquidity. Officials emphasized their assessment is in the early stages with no timeline on a possible decision. 

Source: The Wall Street Journal, Bloomberg, Federal Reserve, U.S. Bureau of Labor Statistics 

Any data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

The opinions and other information in the commentary are provided as of November 14, 2022. This summary is intended to provide general information only and may be of value to the reader and audience.

Past performance is no guarantee of future results.  This material is not a recommendation of any particular investment strategy, is not based on any particular financial situation or need and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance, or legal advice, and may not be relied on as such.
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