Fed Raises Interest Rates by 0.75 Percentage Point for Third Straight Meeting
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Fed Raises Interest Rates by 0.75 Percentage Point for Third Straight Meeting

Officials project short-term rates will rise above 4.25% by year’s end, signal further large increases at coming meetings

By NICK TIMIRAOS
Fri, Sep 23, 2022 8:05amGrey Clock 5 min

WASHINGTON—The Federal Reserve approved its third consecutive interest-rate rise of 0.75 percentage point and signalled additional large increases were likely even though they are raising the risk of recession.

Fed officials voted unanimously to lift their benchmark federal-funds rate to a range between 3% and 3.25%, a level last seen in early 2008. Nearly all of them expect to raise rates to between 4% and 4.5% by the end of this year, according to new projections released Wednesday, which would call for sizeable rate increases at policy meetings in November and December.

“We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t,” Fed Chairman Jerome Powell said at a news conference after the rate decision.

Stock markets tumbled after a volatile trading day. The broad S&P 500 index fell 66 points, or 1.7%, to 3789.93. The yield on the two-year U.S. Treasury note settled around 3.993%, according to Tradeweb, from 3.962% Tuesday, nearly a 15-year high. Just after the Fed’s announcement, it had touched as high as 4.12%. Meanwhile, yields on longer-term Treasurys fell, since higher rates could lead to a sharper economic downturn.

Officials projected that rate rises will continue into 2023, with most expecting the fed-funds rate to rest around 4.6% by the end of next year. That was up from 3.8% in their projections this past June.

Analysts said they hadn’t expected the Fed to show quite so high an endpoint for the rate. Given how persistently elevated inflation has been, “I wouldn’t be surprised to see them go even higher than what they’ve written down—say, to 5%,” said Ellen Meade, an economist at Duke University who is a former senior adviser at the Fed.

The projections showed considerable divergence over what might happen after next year. Around one third of officials expect to hold the fed-funds rate above 4% through 2024, while others anticipate more rate cuts.

“There is a message here that rates will stay higher for longer, and this message is really sticking with market participants,” said Blerina Uruci, U.S. economist at T. Rowe Price.

Even though the economy isn’t yet showing the full effects of Fed rate increases, “all of this volatility and uncertainty makes it hard for businesses to make plans. There are some benefits to having this hiking of interest rates over and done with sooner,” she said.

One year ago, the Fed was signalling rates might stay near zero for another year, and it was purchasing Treasury and mortgage securities to provide additional stimulus. Officials misjudged the strength of the economy’s rebound from the pandemic and how high inflation would rise.

They are now raising rates at the most rapid pace since the 1980s and have approved increases at five consecutive policy meetings, starting in March when they lifted the fed-funds rate from near zero. Until June, the Fed hadn’t raised rates by 0.75 point since 1994.

Officials made a second such increase in July but signalled more concerns about overdoing rate rises, which, together with investor optimism about how quickly inflation might decline, fuelled a market rally.

The rally threatened to undercut the Fed’s steps to slow the economy and weaken price pressures, and Mr. Powell delivered a blunt speech last month in Jackson Hole, Wyo., designed to underscore the Fed’s commitment to reducing inflation.

To limit further confusion on Wednesday, Mr. Powell prefaced his answers to reporters’ questions with a disclaimer. “My main message has not changed at all since Jackson Hole,” he said.

Throughout his press conference, “what Chair Powell was trying to do was keep to a minimum the biggest risks to getting inflation to come down—which was market participants getting ahead of themselves and actually easing financial conditions,” said Vincent Reinhart, chief economist at Dreyfus and Mellon.

The higher the Fed raises rates, the greater the risk that it will go too far, tipping the economy into a recession. But Mr. Powell repeatedly emphasised the need to bring inflation down now to avoid an even worse recession later.

“No one knows whether this process will lead to a recession or, if so, how significant that recession will be,” he said. “We certainly haven’t given up the idea that we can have a relatively modest increase in unemployment. Nonetheless, we need to complete this task.”

The economy slowed in May and June but appeared to regain momentum through the summer. Mr. Powell said Wednesday that the Fed wanted to see more evidence that the labor market was cooling off. The economy has added an average of 380,000 jobs monthly over the past six months, far above the rate of about 50,000 that economists think would keep the unemployment rate steady.

Meanwhile, inflation readings haven’t worsened this summer but also haven’t shown the kind of improvement that the Fed and many economists have wanted to see. Falling gasoline prices caused overall inflation to ease in July and August, but climbing housing costs and prices for services such as dental and hospital visits, haircuts and car repairs have kept inflation elevated.

The consumer-price index rose 8.3% in August from a year earlier, down from June’s increase of 9.1%, a four-decade high. Mr. Powell pointed to how inflation using a separate gauge has consistently run at a pace of 4.5% or higher, despite diminishing supply-chain problems.

“That’s not where we expected or wanted to be,” he said. “Our expectation has been that we would begin to see inflation come down largely because of supply-side healing. By now we would have thought that we would have seen some of that. We haven’t.”

Fed officials projected the unemployment rate rising to 4.4% next year, from 3.7% in August and 3.5% in July. Historically, an increase of that much in that span has coincided with a recession.

Several analysts, including Ms. Meade and Ms. Uruci, said they found it implausible that Fed officials projected they might bring inflation down to 3% next year and 2% by 2025 without doing more damage to the labor market.

At the same time, Mr. Powell appeared to be more candid about the risks. “He is using words that are open to recession,” said Ms. Meade.

The U.S. mortgage market has been slammed by the prospect of tighter money, and the average 30-year fixed-rate mortgage jumped to 6.25% last week from 6.01% the week before, the Mortgage Bankers Association said Wednesday. That was the highest level since October 2008. Applications for loans to purchase homes were down 30% from the same week last year.

Mr. Powell said it was likely the housing market, which boomed during the pandemic, driving prices to new highs, would weaken significantly. Mr. Reinhart said the admission was notable because the economy has always entered a recession when the housing sector has contracted.

“They want to convey that policy will be firm and that the economy will suffer as a result. It’s hard for them to say how much it will suffer,” said Mr. Reinhart.



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A Killer Golf Swing Is a Hot Job Skill Now

Companies are eager to hire strong players who use hybrid work schedules to schmooze clients on the course

By CALLUM BORCHERS
Fri, Jun 14, 2024 5 min

Standout golfers who aren’t quite PGA Tour material now have somewhere else to play professionally: Corporate America.

People who can smash 300-yard drives and sink birdie putts are sought-after hires in finance, consulting, sales and other industries, recruiters say. In the hybrid work era, the business golf outing is back in a big way.

Executive recruiter Shawn Cole says he gets so many requests to find ace golfers that he records candidates’ handicaps, an index based on average number of strokes over par, in the information packets he submits to clients. Golf alone can’t get you a plum job, he says—but not playing could cost you one.

“I know a guy that literally flies around the world in a private jet loaded with French wine, and he golfs and lands hundred-million-dollar deals,” Cole says.

Tee times and networking sessions have long gone hand-in-golf-glove. Despite criticism that doing business on the course undermines diversity, equity and inclusion efforts—and the fact that golf clubs haven’t always been open to women and minorities —people who mix golf and work say the outings are one of the last reprieves from 30-minute calendar blocks

Stars like Tiger Woods and Michelle Wie West helped expand participation in the sport. Still, just 22% of golfers are nonwhite and 26% are women, according to the National Golf Foundation.

To lure more people, clubs have relaxed rules against mobile-phone use on the course, embracing white-collar professionals who want to entertain clients on the links without disconnecting from the office. It’s no longer taboo to check email from your cart or take a quick call at the halfway turn.

With so much other business conducted virtually, shaking hands on the green and schmoozing over clubhouse beers is now seen as making an extra effort, not slacking off.

Americans played a record 531 million rounds last year. Weekday play has nearly doubled since 2019, with much of the action during business hours , according to research by Stanford University economist Nicholas Bloom .

“It would’ve been scandalous in 2019 to be having multiple meetings a week on the golf course,” Bloom says. “In 2024, if you’re producing results, no one’s going to see anything wrong with it.”

A financial adviser at a major Wall Street bank who competes on the amateur circuit told me he completes 90% of his tasks by 10 a.m. because he manages long-term investment plans that change infrequently. The rest of his workday often involves golfing with clients and prospects. He’s a member of a private club with a multiyear waiting list, and people jump at the chance to join him on a course they normally can’t access.

There is an art to bringing in business this way. He never initiates shoptalk, telling his playing partners the round is about having fun and getting to know each other. They can’t resist asking about investment strategies by the back nine, he says.

Work hard, play hard

Matt Parziale golfed professionally on minor-league tours for several years, but when his dream of making the big time ended, he had to get a regular job. He became a firefighter, like his dad.

A few years later he won one of the biggest amateur tournaments in the country, earning spots in the 2018 Masters and U.S. Open, where he tied for first among non-pros.

The brush with celebrity brought introductions to business types that Parziale, 35 years old, says he wouldn’t have met otherwise. One connection led to a job with a large insurance broker. In 2022 he jumped to Deland, Gibson Insurance Associates in Wellesley, Mass., which recognised his golf game as a tool to help win large accounts.

He rescheduled our interview because he was hosting clients at a private club on Cape Cod, and squeezed me in the next morning, before teeing off with a business group in Newport, R.I.

A short time ago, Parziale couldn’t imagine making a living this way. Now he’s the norm in elite amateur golf circles.

“I look around at the guys at the events I play, and they all have these jobs ,” he says.

His boss, Chief Executive Chip Gibson, says Parziale is good at bringing in business because he puts as much effort into building relationships as honing his game. A golf outing is merely an opportunity to build trust that can eventually lead to a deal, and it’s a misconception that people who golf during work hours don’t work hard, he says.

Barry Allison’s single-digit handicap is an asset in his role as a management consultant at Accenture , where he specialises in travel and hospitality. He splits time between Washington, D.C., and The Villages, Fla., a golf mecca that boasts more than 50 courses.

It can be hard to get to know people in distributed work environments, he says. Go golfing and you’ll learn a lot about someone’s temperament—especially after a bad shot.

“If you see a guy snap a club over his knee, you don’t know what he’s going to snap next,” Allison says.

Special access

On a recent afternoon I was a lunch guest at Brae Burn Country Club, a private enclave outside Boston that was the site of U.S. Golf Association championships won by legends like Walter Hagen and Bobby Jones. I parked in the second lot because the first one was full—on a Wednesday.

My host was Cullen Onstott, managing director of the Onstott Group executive search firm and a former collegiate golfer at Fairfield University. He explained one reason companies prize excellent golfers is they can put well-practiced swings on autopilot and devote most of their attention to chitchat.

It’s hard to talk with potential customers about their needs and interests when you’re hunting for errant shots in the woods. It’s also challenging if you show off.

The first hole at Brae Burn is a 318-yard par 4 that slopes down, enabling big hitters like Onstott to reach the putting green in a single stroke. But to stay close to his playing partners and keep the conversation flowing, he sometimes hits a shorter shot.

Having an “in” at an exclusive club can make you a catch. Bo Burch, an executive recruiter in North Carolina, says clubs in his region tend to attract members according to their business sectors. One might be chock-full of real-estate investors while another has potential buyers of industrial manufacturing equipment.

Burch looks for candidates who are members of clubs that align with his clients’ industries, though he stresses that business acumen comes first when filling positions.

Tami McQueen, a former Division I tennis player and current chief marketing officer at Atlanta investment firm BIP Capital, signed up for private golf lessons this year. She had noticed colleagues were wearing polos with course logos and bringing their clubs to work. She wanted in.

McQueen joined business associates on the golf course for the first time in March at the PGA National Resort in Palm Beach Gardens, Fla. She has lowered her handicap to a respectable 26 and says her new skill lends a professional edge.

“To be able to say, ‘I can play with you and we can have those business meetings on the course’ definitely opens a lot more doors,” she says.

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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