Weekly-10Q: For investors, the question remains — At what pace will the Fed raise rates in the future?
- The Federal Reserve’s December meeting minutes that released last week show that there will be no rate cuts in 2023 as the battle against inflation continues.
- Coinbase faces penalty to pay a sum of $100 million to the New York State Department of Financial Services, as the firm violated anti-money laundering laws by failing to conduct adequate background checks.
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We resumed last week's 10-Q installment after the holiday break. Wishing our readers a joyous 2023 -- Sara Khairi, 10-Q Editor
Last, to last week, we covered: The implications of rapid BNPL growth — 3 questions with the VP of Global Buy Now Pay Later at PayPal, Steve Mikulcik
For investors, the question remains: At what pace will the Fed raise rates in the future?
No rate cuts in 2023.
The Federal Reserve’s December meeting minutes released last Wednesday show that officials continue to try to win the battle against record inflation, and expect higher interest rates to stick around until further headway is made.
This means the stock market should not expect a rate cut or decline until 2024, according to analysts.
The last rate hike of 50 basis points in December 2022 ended a string of four consecutive 75-point increases, raising the benchmark Fed funds rate target range to 4.25%-4.5%, the highest level since the 1980s.
Additionally, the minutes indicated that equity markets moved up around October 2022. However, according to Fed officials, equity market players recognize growth risks in the near future, which led them to lower earnings expectations for coming quarters in the new year.
A tight labor market remains the Fed’s biggest concern. However, Fed members have agreed to work in tandem with the Committee guidelines that pursue maximum employment growth and bring inflation back to its 2% target.
In the next Fed meeting scheduled for January 31 to February 1, 2023, markets expect the Fed to raise rates by 0.25%
Top stories of the week
Amazon is scaling back more than it had anticipated
Amazon plans to lay off more than 18,000 workers, surpassing the number of job cuts the firm had announced last year. Andy Jassy, Amazon’s CEO, came forward with a public announcement after an employee gave away the news -- citing economic uncertainty as the reason for the sudden news. The firm suffered a $900 billion (50%) decline in its stock over the course of last year. It plummeted from an all-time high in 2021 to a three-year low in 2022. (CNBC)
Coinbase fined $100 million for unsatisfactory background checks
Coinbase will have to pay a $50 million fine to the New York State Department of Financial Services and has also been ordered to spend $50 million on improving its compliance program. The penalty comes from New York financial regulators, who have found that the firm violated anti-money laundering laws by failing to conduct adequate background checks. State regulators first came across these issues in May 2020 during routine supervisory examinations. The Department of Financial Services found disparities in multiple compliance programs, including customer due diligence procedures, transaction monitoring systems, Office of Foreign Assets Control (OFAC) programs, and anti-money laundering risk assessments. Additionally, regulators found disparities in Coinbase’s retention of books and records and reporting to the state department. (TechCrunch)
Jack Henry and Constant partner to introduce zero-processing loan servicing solutions
Self-service loan management software firm Constant has launched its zero-processing loan servicing solutions, which are now accessible via Jack Henry’s digital banking platform. Constant tapped into Jack Henry's Banno Digital Toolkit, the same set of APIs the Banno Digital Platform is built on, to embed its technology into the digital experiences offered by community and regional financial institutions. This access has enabled Constant to integrate directly into the digital banking platform. For Jack Henry, this integration will further expand its growing ecosystem of over 850 fintechs, providing financial services to approximately 8,000 financial institutions. (IBS Intelligence)
JPMorgan to face Ray-Ban lawsuit over cyber theft
A New York judge has ruled that JPMorgan Chase must face a lawsuit from the French manufacturer of Ray-Ban glasses, which said that the bank failed to stop suspicious transactions after cybercriminals looted $272 million from its account. In the suit, which was filed last April, the Thailand unit of EssilorLuxottica said that JPMorgan should have detected, reported, and blocked suspicious payments that occurred in the last few months of 2019. (Reuters)
Silvergate stock dipped 40% following withdrawals from the crypto bank
The collapse of FTX has caused a spike in withdrawals from crypto banking group Silvergate Capital, while it already faced deposits dropping to $3.8 billion in the last quarter. Amid a “crisis of confidence” across the cryptocurrency industry, Silvergate Capital will cut 40% of its workforce and cast aside some projects — including a blockchain-based payment solution based on Meta’s abortive Diem project. Silvergate stock was down by 40% in premarket trading on Thursday. (Seeking Alpha)
Visa envisions global travel recovery powered by digital payments in 2023
In the new year, companies are predicting trends and making efforts to navigate the macroeconomic climate that persisted in 2022. Visa Global Senior Vice President of Merchant Sales and Acquiring, Jeni Mundy, said there’s an “air of optimism” around leisure travel in 2023. Visa is seeing travelers spending more in the locales they visit, contradicting inflationary trends of the past year. In spending and payments, leisure is one of the fields that is recovering and progressing. With strong demand for travel experiences coming out of 2022, it has a chance at crossing into 2023, according to her. (PYMNTS)
Tweet of the week
Chart of the week
The best months for stock market gains, based on the performance of the four major stock indexes
- Fintech stocks did worse than Fin or Tech in 2022 (WSJ)
- Did the CFPB hit Wells Fargo harder in its reputation than its wallet? (The Financial Brand)
- How Bank of America achieved a massive comeback from the brink of collapse (CNBC)