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More Work to be Done.

September 2023 Economic Review

The Consumer Price Index (CPI) climbed 0.6% in the month of August, representing a 3.7% rise year-over-year. U.S. economists were slightly more optimistic, forecasting a 3.6% year-over-year jump in August. This indicates that the Federal Reserve may still look to raise rates at future Federal Open Market Committee (FOMC) meetings, although a rate hike at the upcoming September 20 meeting has likely been ruled out. Fed Chair Jerome Powell has emphasized the idea of “higher-for-longer” when discussing rates at the annual Jackson Hole central banking symposium in August. Other members included in the rate-setting FOMC, even some on the more hawkish side, have discussed the possibility of pausing additional rate hikes to allow more time for the 525-bps tightening since March 2022 to take its desired effect.

The main culprit contributing to August inflation figures is the surge in oil. Oil prices are up 25% since late June as the supply cuts put a squeeze on the market. Prices hit new year-to-date highs on September 12 with West Texas Intermediate closing just below $89 per barrel. Similarly, brent crude futures reached above $92 per barrel, representing the highest levels in oil prices since November 2022. Gas prices rose 10.6% in August right after a 0.2% jump in July as well.

The unemployment rate rose to 3.8% in August, signaling that the rate hikes have begun cooling the U.S labor market, but still not where the Fed wants that number to be. The U.S. housing market remains elevated as well, despite a slight market correction in the real estate market brought on by high mortgage rates earlier in the year. Now, it looks like real estate prices are starting to resume their climb again.

It isn’t all bleak, however; the core CPI, calculated from stripping out the more volatile costs of food and gas prices, posted 4.3% in August. This is an improvement from the 4.7% figure we saw in July. The Fed has several positives to take away from these figures, but there is still more work to be done.

Current Economic Releases
Data Period Value
GDP QoQ Q2 ’23 2.10%
US Unemployment Aug ’23 3.80%
ISM Manufacturing Aug ’23 47.6
PPI YoY Aug ’23 1.60%
CPI YoY Aug ’23 3.70%
Fed Funds Target Sep 13, 2023 5.25% – 5.50%
Treasury Yields
Maturity 9/13/23 8/11/23 CHANGE
3-Month 5.310% 5.419% -0.119%
6-Month 5.521% 5.472% 0.013%
1-Year 5.396% 5.337% 0.018%
2-Year 4.969% 4.895% 0.048%
3-Year 4.645% 4.575% 0.145%
5-Year 4.384% 4.301% 0.218%
10-Year 4.249% 4.152% 0.319%
30-Year 4.343% 4.261% 0.348%
Agency Yields 
Maturity 9/12/23 8/11/23 CHANGE
3-Month 5.509% 5.455% 0.054%
6-Month 5.533% 5.474% 0.058%
1-Year 5.443% 5.417% 0.026%
2-Year 5.012% 4.983% 0.029%
3-Year 4.733% 4.686% 0.047%
5-Year 4.487% 4.424% 0.062%
Commercial Paper (A1/P1)  
Maturity 9/13/23 8/11/23 CHANGE
1-Month 5.360% 5.340% 0.020%
3-Month 5.500% 5.520% -0.020%
6-Month 5.760% 5.710% 0.050%
9-Month 5.820% 5.800% 0.020%

Source: Bloomberg. Data as of September 13, 2023. Data unaudited. Many factors affect performance including changes in market conditions and interest rates and in response to other economic, political, or financial developments. Investment involves risk including the possible loss of principal. No assurance can be given that the performance objectives of a given strategy will be achieved. All comments and discussions presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. The information presented should not be used in making any investment decisions. This material is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.