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Tag Archives: rate cuts

The Path Clear For More Rate Cuts, If You Like That Sort of Thing

If you like rate cuts and think they are powerful tools to help manage a soft patch, then there was good news in two international oil reports over the last week. The US Energy Information Administration (EIA) cut its forecast for global demand growth for the seventh straight month. On Friday, the International Energy Agency (IEA) downgraded its estimates for the third time in four months. That wasn’t all, as the EIA’s report focused in on some more sobering aspects of the US economy....

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Payroll Friday: This Is Bad, Folks

You never fixate on a single employment report. It is a lesson that Jay Powell may not have yet learned. Either that, or he was desperately grasping for straws. The Federal Reserve is trying to thread a very fine needle; on the one hand, the rate cuts. On the other, he doesn’t want them to become a catalyst for people to say, see the economy really is weak! That means he has to claim the rate cut is a big deal but not that big of a deal because the economy is otherwise strong. Even the FOMC...

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A Day Later, No Takers Anywhere

I see it as reality intruding. The myth of the Fed continues to linger in the popular media, the mainstream press will dutiful parrot the idea that rate cuts and an end to QT are “highly accommodative.” The FOMC told them yesterday what to write and say: These changes in the anticipated path of interest rates have eased financial conditions and have supported the economy. For about half an hour yesterday, that’s how it looked. Yields jumped somewhat and eurodollar futures prices dropped more....

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Sure, One and Done

The FOMC yesterday reiterated their stance that the economy was strong. But they also hedged. A one-and-done rate cut is one thing, some insurance (allegedly) for keeping the good times rolling. What about QT, though? That’s the funny thing that you can’t help but get stuck on. Not bank reserves, mind you, they’re worthless (perhaps literally). Rather, Federal Reserve officials appear to be experiencing that sinking feeling, too. QT was supposed to continue unabated until the level of...

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The Correlations Behind The Rate Cut(s)

In every likelihood, the Federal Reserve today is going to join other central banks around the world who have already cut rates. It is the synchronized signal completing the turn from globally synchronized growth into a globally synchronized downturn. To most people in the United States, at least, this is a puzzling shift.   The unemployment rate says things are rock solid. Only seven months ago, the same Federal Reserve officials now voting for “additional accommodation” were then...

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Powell Readies His Noose

The problem continues to be, I’m sure, is one of perception. Economists, politicians, and mostly central bankers have been saying for years that the real economy is the one you see in the unemployment rate. Things are booming. The labor market is awesome, even epically tight. Between last year and this year, going by the unemployment rate the economy has only gotten better. Why in the world would the Federal Reserve be contemplating rate cuts? After all, who cares if inflation is less than...

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US Economic Crosscurrents Reach the 50 Mark

In the official narrative, the economy is robust and resilient. The fundamentals, particularly the labor market, are solid. It’s just that there has arisen an undercurrent or crosscurrent of some other stuff. Central bankers initially pointed the finger at trade wars and the negative “sentiment” it creates across the world but they’ve changed their view somewhat. A few billion in tariffs, even if we include what is to this point only proposed, that’s just not enough to create these more...

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What Does It Mean That Real Estate, Not Equities, Is Driving Monetary Policy?

In the world of assets classes, I don’t believe it is equities which hold the Federal Reserve’s attention. After the 2006-11 debacle, the big bust, you can at least understand why policymakers might be more attuned to real estate no matter how the NYSE trades. It may be a decade ago, but that’s the one thing out of the Global Financial Crisis which was seared into the consciousness of everyone who lived through it. From the general public to politicians, don’t screw up housing. It’s also the...

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Housing: Going Wrong In The Few Things That Were Going Right

It certainly doesn’t feel like a bubble. We’ve heard about home prices in many cities skyrocketing like there has been one, still there does seem to be something different. If it is a bubble, it sure isn’t the same as the last one, the big one fifteen years ago. Much is missing this time around. For one thing, prices are disconnected from volume. For all the talk of a boom in the economy the housing sector never joined in. Not really. I wrote last year that a truly booming economy is one that...

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Much More Than Rate Cuts On (Dis)Inflation

Things have changed, obviously. Chairman Powell and the rest of the FOMC, the majority anyway, have come around to rate cuts. Where they were hawkish in December, noncommittal as late as May, they’ve been spooked into them over the last month or so. As it stands, the first one is less than three weeks away. It’s not so much the lack of inflation any longer. No one should ever forget the 2018 story, the inflation hysteria which raged throughout much of last year and ended in a pile of confused...

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