Dear valued client,
Attention was focused on Jerome Powell’s (Chairman of the Federal Reserve) 2-day testimony in front of Congress this week. He stated that interest rates were probably going to go “higher than previously anticipated” in light of stronger economic data. A portion of this data included the February jobs report released today indicating an addition of 311,000 jobs. As explained by the Phillip’s Curve (blog post from a month ago), a strong labor market will result in inflation remaining “sticky.” Many are predicting the Fed will raise rates by 0.5 percentage points in their meeting in three weeks’ time, bringing the terminal rate to around 5.5% to 5.75%, its highest level in 17 years.
Given Powell’s comments, markets shed significant gains, pricing in a higher-than-expected interest rate hike at the end of the month.
Turning to our side of the border, the Bank of Canada decided on Wednesday to not raise interest rates this month. Governor Tiff Macklem stated their dovish stance was “conditional on economic developments coming out in line with our forecasts.” This makes the Bank of Canada the first major central bank to pause interest rate hikes, opting to hold its benchmark interest rate at 4.5%.
In optimistic energy news, Georgia will have a fully operating nuclear power plant by this summer. The Vogtle Unit 3 is currently one of 93 nuclear reactors running in the U.S. that together generate 20% of the country’s electricity, according to CNBC. I anticipate that number will continue to increase throughout the decade as fossil fuels are being phased out, while wind and solar are still too unreliable.
I’d like to take a step back and share a quote that highlights the cultural environment we’ve inherited. The progress and prosperity we experience are unprecedented by historical standards. It is imperative to avoid taking it for granted. It reads;
“Liberal democracy is an artificial environment, carefully crafted to both contain human nature and convert it into an engine of progress. When we grow up within an artificial habitat that values human inventions like reason and fairness and humanity, it can be easy to forget just how tenuous that environment is. It’s easy to forget that we’re living in a rare anomaly within human history—an anomaly held up only by trust, cultural norms, and shared assumptions. It’s easy to become overconfident in the stability and permanence of that environment and forget that the worst of human nature is always lurking just beneath the surface. But the reality is that liberal democracy is a human construct, held in place not only by laws but by the “support beam” of liberal norms—shared notions of what is and isn’t tolerable or harmful and by a shared determination to uphold those standards. When that support beam weakens, the environment can quickly collapse.” – Tim Urban
Have a terrific weekend,
PW
