It’s March Madness time! No, not the basketball tournament, but the Federal Open Market Committee meeting starting today! We’ll take a quick look at where the inflation numbers are and how the FOMC will likely respond.

We also see how new car prices have stabilized in the last year and the adoption of electric and hybrid vehicles by U.S. consumers.

The Conference Board released its latest reading of the Consumer Confidence Index today. US consumer confidence fell in February for the first time in four months as Americans’ views deteriorated about the outlook for the economy, the job market and financial conditions. The crazy part of The Conference Board report is continued confidence by consumers that the stock market will continue its upward trend.

But first, a quick note regarding the release of last month’s Federal Open Market Committee (FOMC) minutes. Officials indicated at their last meeting that they were not in a rush to cut interest rates. No cuts would be coming until the FOMC held “greater confidence” that inflation is “moving down sustainably to 2 percent.”

While the minutes acknowledged the “solid progress” being made, the committee viewed some of that progress as “idiosyncratic” and possibly due to factors that won’t last.

Let’s take a look at the latest macroeconomic indicators and how the FOMC and the stock markets might react.

Wall Street is clearly eager for interest rate cuts. Since the Federal Reserve released the minutes of their latest policy meeting earlier this month, the conversation on the street isn’t IF rates will be cut in 2024, but WHEN. Here are a few of the latest headlines I’ve seen:

Three Stocks to Buy Before the Fed Cuts Interest Rates in 2024

Investors Expect Fed to Cut Rates Soon

The Fed Will Cut Interest Rates Six Times in 2024

These headlines and plenty others reflecting the same line of thought are overly hopeful and misguided. As Fed Chair Jerome Powell likes to say, let’s take a look at the data to get a hint of what the FOMC is thinking, and why I believe interest rate cuts won’t happen until the second half of 2024.

I must first disclose I have never been to a fortune teller. But I understand there are some who are fascinated by the art of tasseography or identifying symbols and interpreting messages found in the shapes formed by tea leaves at the bottom of a cup.

Some might say the famous “dot plot” made by members of the Federal Open Market Committee (FOMC) is the economist’s version of reading tea leaves. Take a scoop of economic data, add them to a cup of prognostication, swirl three times, then close your eyes and pick your dot location. I’m sure it’s far more complicated and intentional than that. At least I hope it is.

The FOMC released its quarterly Summary of Economic Projections (SEP) last week, which includes the “Dot Plot” used by the Federal Reserve to communicate its policymakers' economic projections and expectations for the future. This chart provides a visual representation of individual committee members' forecasts, helping market participants, economists, and the public to gauge the central bank's outlook on key economic indicators. Today we will take a look at what the FOMC dot plot is, how to interpret the latest chart and what the FOMC is predicting for the economy.

This is definitely the week for news on fossil fuels production. OPEC+ members meet this week – delayed until this Thursday – to decide policy on oil production into 1Q 2024. Also, the 2023 United Nations Climate Change Conference, or Conference of the Parties of the UNFCCC – more commonly referred to as COP28 – begins Thursday in Dubai. But OPEC+ members are secretly using the conference to seal big oil and gas deals, a clear conflict of interest.

And the big news is the US is now producing more crude oil than ever—13.2 million barrels per day, per the US Energy Information Administration (EIA), topping the pre-Covid peak of 13.1 million. That amount is nearly double the volume from a decade ago, making the US a net exporter of domestic crude.

Oil prices have slumped recently due to robust crude supplies, despite OPEC+ cuts in production and reduced Russian exports. In light of all this, we’ll take a look at the outlook for oil and gas prices into 2024.

I’m taking some time off to recover and get my legs back under me. Until then, I’m working with my staff to select the topics and write the economic news you have come to enjoy in my Forecasts & Trends E-Letter. Every week they have been instrumental in helping me choose topics and think through the analysis I write.