Tag: Jerome Powell

Powell Should Raise By 100 Basis Points

Powell Should Raise By 100 Basis Points

The 2-Year Treasury yield sits at approximately 3.42%. Therefore the Fed ought to raise the Fed Funds Rate by 100 bps which would put the Fed Funds Rate lower and upper bound at 3.25-3.50%. The next FOMC meeting will be held September 20th and 21st. Simultaneously, the Fed ought to stick to its plan of … Continue reading Powell Should Raise By 100 Basis Points

Fix The Problem Rather Than Dance At The Edges

Fix The Problem Rather Than Dance At The Edges

What Fed Chair Powell spouts Friday in Jackson Hole WY will be meaningless in the long-term. The longer the Fed allows price inflation to persist, the longer the economy will remain in this stagflationary environment of high prices and low economic growth (if any real growth at all). It's simple math. For every incremental dollar … Continue reading Fix The Problem Rather Than Dance At The Edges

Treasury Yields Up; Risk Assets Down

Treasury Yields Up; Risk Assets Down

Treasury Yields moved higher and therefore equity indices moved lower. The Fed is not done tightening, not even close. The Fed won't tighten as much as it should, but it will tighten for much longer than many market participants expect - especially those who expect the Fed to reverse course and lower rates sometime between … Continue reading Treasury Yields Up; Risk Assets Down

A Fed Hike In August?

A Fed Hike In August?

If July Core CPI comes in higher than the 5.9% figure reported for June we believe there will be a 50% probability that the Fed could raise the Fed Funds Rate in August rather than wait for the September 20-21 FOMC meeting. The Fed is nowhere near a neutral rate (as we wrote earlier this … Continue reading A Fed Hike In August?

A Short & Shallow Recession?

A Short & Shallow Recession?

What is the logic to suggest that a "short & shallow" recession is likely? Isn't it more likely things will get worse before they get better? The U.S., Europe and China are experiencing economic slowdowns. The U.S. is in a recession if you believe the Atlanta Fed (GDPNow for Q2 2022 is -1.6%. See GDPNow … Continue reading A Short & Shallow Recession?

The Fed Is Blinking

The Fed Is Blinking

It would seem to us that the Fed is stalling its QT effort. Inflation will not materially decline unless the Fed materially shrinks the money supply. Looking at the Fed's balance sheet it appears the Fed has stalled its QT effort, especially when one considers that the Fed had planned to reach a $95 billion … Continue reading The Fed Is Blinking

When The Fed Last Pulled Back Too Soon

When The Fed Last Pulled Back Too Soon

The consensus seems to be that the Fed will cut interest rates in 2023. The 1970's illustrate how inflation could run out-of-control should the Fed prematurely reverse course on its tightening cycle. Priority One: The Fed wants to avoid out-of-control inflation at all costs. Our view is that Fed Chair Powell will be willing to … Continue reading When The Fed Last Pulled Back Too Soon