Above the Fold

Fed’s Tone Shifts

As expected, the Federal Reserve (Fed) again left its benchmark interest rate unchanged, but did signal a few alterations to its forecasts. The central bank offered a more resolute tone in their bond-buying taper projections, and noted interest rates would begin to rise by late 2022, earlier than previously telegraphed. Its monthly, $100 billion purchase of mortgage-backed securities and Treasuries is likely to begin slowing soon, especially if economic data points continue to improve. 

The committee also modified its dot-plot, which is essentially a forward-looking interest rate projection to help prepare investors and consumers. Its new forecasts include three rate hikes in 2023 and three more in 2024, with its key interest rate ending up at 1.8% by the end of that period. The Fed offers these projections and detailed commentary on forecasts to help avoid another “Taper Tantrum” that shook global markets back in 2013. Continued inflationary pressure and a rebounding economy are helping drive the sooner-than-expected changes to monetary policy. But make no mistake, the current rate landscape and overall policy remains very accommodative. Stocks held their rally after the news, and Treasury bond yields rose as investors sold debt securities. 

Three Things 

1. Google Pays Up in NYC – The beleaguered New York City commercial real estate market is getting a shot in the arm as Google plans to purchase a $2.1 billion office building. The 1.3 million-square-foot waterfront property will mark the most expensive transaction in the city since the pandemic began and is a sign that rent rates and vacancies may have found a floor (no pun intended). Leasing activity in NYC was more than double what it was in July, another sign that the marketplace is improving. 
2. Fuel and Natural Gas Prices Abnormally High – The price of gasoline tends to fall after the summer driving season ends, but fuel costs are nearly 50% higher than they were this time last year and less likely to drop dramatically, according to experts. Natural gas prices have surged to nearly $5 per million BTUs (British thermal units), which is abnormal as this is supposed to be the “off-season” for demand. Gas prices may remain elevated as the number of crude and natural gas rigs has remained flat. 
3. “Digital Seeds” Could Help Monitor Environmental Changes – An international consortium of scientists led by engineers from Northwestern University developed an optimal shape for a new sensor called a “flier.” These seed-like devices, which range from 0.4mm to 40mm across, can be dropped from aircraft, and carried by the wind long distances to detect everything from UV light levels and atmospheric pollution to monitoring chemical spills on land and water. 

Did You Know? 

Standard Oil Was First to Drill in Saudi Arabia

It was on this date in 1933 that a team of American geologists from Standard Oil landed at the Persian Gulf port of Jubail. Their mission was to trek into the desert searching for an optimal drilling site. Saudi King Abdel Aziz granted the Standard Oil Company of California permission to explore and drill in the country’s Eastern Province. The initial partnership became known as the Arabian American Oil Company (Aramco). Aramco had exclusive rights to all the oil under the Eastern Desert (which started producing in 1938), but had to pay the Saudi government a relatively small, regular stipend. The contract was renegotiated in 1950, but the Saudis took full control of their oil in 1980, realizing hundreds of billions in revenue.