The Fed will prop up the banking sector with lower rates. Our view is that the Fed will lower its Fed Funds Rate by Labor Day.
- The only way to make the banking sector solvent is for the Fed to get its Fed Funds Rate down to where the banks can earn a net interest margin sufficient for them to remain profitable going concerns. I don’t know if that’s a 2% or 3% Fed Funds Rate, but it’s well below the current 5.00-5.25% range.
- Here’s betting that Powell takes the Fed Funds Rate down by Labor Day.
- Should the Fed wish to carry forth the illusion of its hawkishness, it may run QT in the background (thus far QT has been underwhelming).
One thought on “The Fed Will Prop Up The Banking Sector”
Comments are closed.