MONEY MARKET | September 2022

Taxable Money Market
Commentary

  • Tweet
  • Share on LinkedIn
  • Share via email
  • Print
  • Download
John Tobin

John Tobin

Chief Investment Officer,
Money Market Strategies and Distribution

The Federal Open Market Committee (FOMC) July 27 meeting minutes reflected a consensus view that inflation remains very high, the labor market remains strong and tighter Federal Reserve (Fed) policy may have negative implications for growth. The Fed continues to assess the impact of higher rates on inflation and suggested tempering the pace and magnitude of policy tightening at some point. It appears that the Fed is trying to engineer a shallow recession to restore price stability, while avoiding stagflation.

Chair Powell delivered a hawkish speech at this year’s Jackson Hole Economic Symposium. Chair Powell’s speech was direct, pointing to the Fed’s focus of restoring price stability to their 2% mandate. He said the central bank’s “overarching focus right now” is inflation. At least for the short term, the Fed seems to have moved to just a single mandate, inflation. Chair Powell also provided context the FOMC’s interpretation of recent softening inflation data. Powell stated that, while encouraging, “a single month's improvement falls far short of what the Committee will need to see before we are confident that inflation is moving down.”

The August payroll report reflected moderation in job growth but remained strong enough to keep markets guessing about September’s FOMC meeting. Nonfarm payrolls increased by 315k versus expectations of 298k. The labor force participation rate moved higher to 62.4% from 62.1%, moving the unemployment rate to 3.7% from 3.5%, which is the first increase since January. Professional and business services led the increase in jobs, with leisure and hospitality exhibiting the smallest gains in almost two years. Wages were softer with average hourly earnings up 0.3%, less than the expected 0.4%. The continued strong growth in jobs and increase in the unemployment rate adds complexity to the Fed’s decision at the September FOMC meeting. This report will put increased pressure on the results of the September Consumer Price Index (CPI) numbers and may ultimately be the deciding factor for the Fed’s next rate decision.

All investments involve risk, including the possible loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

BNY Mellon Investment Management is one of the world’s leading investment organizations encompassing BNY Mellon’s affiliated investment management firms and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the corporation as a whole or its various subsidiaries generally.

This material has been provided for informational purposes only and should not be construed as investment advice or a recommendation of any particular investment product, strategy, investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances. Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

Dreyfus Cash Investment Strategies (Dreyfus) is a division of BNY Mellon Investment Adviser, Inc. BNY Mellon Investment Adviser, Inc. and BNY Mellon Securities Corporation are companies of BNY Mellon. © 2022 BNY Mellon Securities Corporation, distributor, 240 Greenwich Street, 9th Floor, New York, NY 10286.

MIC-299660-2022-09-09