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By Scott McIntyre
Co-Head of Investment Management
HilltopSecurities Asset Management
The minutes from the September 15-16 FOMC meeting confirmed that Fed officials view inflation as the dominant risk, and indicated additional tightening may be necessary if inflation fails to moderate. Committee members expressed confidence in the economy’s ability to withstand higher borrowing costs, and while a few Fed officials continued to argue for patience, the overall tone was clearly more hawkish than in prior meetings.
Perhaps the most hawkish line in the minutes was that most participants judged that another increase in the target range would likely be appropriate by year-end. This suggests the September move was not viewed by committee members as a one-time adjustment.
The minutes repeatedly emphasized persistent inflation pressures. Policymakers cited:
The committee debated how much additional tightening would be needed. While there was broad consensus on the September increase, there were differing views on the future path. Some participants wanted to see more data before committing to more increases, while others were concerned that inflation could remain elevated without further action.
Market reaction (for both stocks and bonds) has been muted, indicating investors found few surprises in the minutes.
The next potential market-moving data release will be the September Consumer Price Index (CPI), a week from today, while the next FOMC decision will be announced on October 28. As of this afternoon, the futures market is signaling just a 17% probability of an increase later this month. Assuming the committee votes to maintain the current rate target just days before the mid-term elections, the probability of a quarter-point hike at the December meeting is currently at 100%.
About Scott McIntyre, CFA
As HilltopSecurities Asset Management’s Co-Head of Investment Management, Scott McIntyre specializes in investment management services and is responsible for the management, oversight and trade supervision of more than $30 billion in institutional fixed income assets for HilltopSecurities’ public sector municipal clients. Scott also provides investment advice and consulting, reviews local government investment policies, formulates overall investment strategies, evaluates account performance and oversees the day-to-day operations. He is a member of the Chartered Financial Analyst (CFA) Institute and a CFA Charterholder, a two-term advisor to the GFOA Treasury and Investment Management (TIM) committee, a Registered Investment Advisor, and holds FINRA Series 7, 24, 63, and 65 licenses.
About Greg Warner, CTP
As HilltopSecurities Asset Management’s Co-Head of Investment Management, Greg Warner specializes in investment management services and is responsible for the management and oversight of more than $30 billion in institutional fixed income assets for HilltopSecurities’ public sector municipal clients. Greg coordinates all client services and portfolio management duties, including security evaluation and portfolio analysis, trading, investment reporting, board presentations, and monitoring of broker-dealer relationships. He is an advisory committee member to the Texas Association of Counties, a member of the Government Treasurers’ Organization of Texas (GTOT), a Registered Investment Advisor, a Certified Treasury Professional (CTP) and holds FINRA Series 7, 63, and 65 licenses.
About Matt Harris, CFA
As HilltopSecurities Asset Management’s Senior Portfolio Advisor, Matt Harris specializes in investment management services for public sector municipal clients. He developed his experience in the banking industry, supporting balance sheet management, interest rate risk analysis, liquidity planning, and investment strategy implementation. At HilltopSecurities, he works closely with clients to develop and implement customized investment strategies, oversees account documentation and reporting, and assists clients with the public funds depository review process, including competitive RFP evaluations. Harris is a member of the CFA Institute and a CFA Charterholder, a Registered Investment Advisor, and holds FINRA Series 7, 63, and 66 licenses.
The paper/commentary was prepared by HilltopSecurities Asset Management (HSAM). It is intended for informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product. Information provided in this paper was obtained from sources that are believed to be reliable; however, it is not guaranteed to be correct, complete, or current, and is not intended to imply or establish standards of care applicable to any attorney or advisor in any particular circumstances. The statements within constitute the views of HTS and/or HSAM as of the date of the document and may differ from the views of other divisions/departments of Hilltop Securities Inc. and its affiliates. In addition, the views are subject to change without notice. This paper represents historical information only and is not an indication of future performance. Sources available upon request.
HilltopSecurities Asset Management is an SEC-registered investment advisor. Hilltop Securities Inc. is a registered broker-dealer, registered investment adviser and municipal advisor firm that does not provide tax or legal advice. HTS and HSAM are wholly owned subsidiaries of Hilltop Holdings, Inc. (NYSE: HTH) located at 717 N. Harwood St., Suite 3400, Dallas, Texas 75201, (214) 859-1800, 833-4HILLTOP.