Fed's Barr is on the wires saying:
- Households balance sheets are generally strong
- A strong balance sheet is positive as we head into next period for the economy
The retail sales today support that idea. What does that consumer strength do for inflation is the main focus for the Fed. That focus will likely keep the Fed tightening into more restrictive territory.
However there is a limit to that tightening.
Today, SF Fed's Daly said she sees terminal rate between 4.75% and 5.25%. That is above the 4.6% that the Fed projected in the September dot plot. That dot plot will be revised at the December 14 FOMC meeting.
The Fed Chair Powell has said his projections are for a higher terminal rate but did not put a number on it.
Goldman today raised their expectations. They see 50 basis points and 3x 25 basis points in 2023 taking the terminal rate to 5.25%. That is a bit higher than the markets expectations.