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Tag Archives: rate hikes

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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Curve-sanity

There are those which are so very clear in their disingenuousness – to the point of overdoing it and becoming obviously absurd. In the increasingly desperate rush to downplay the headlong race to rate cuts, this one’s up there: Eurodollar futures traders, having decided that the Federal Reserve is likely to cut the fed funds target range at least twice over the next six months, are looking beyond the expected easing cycle in search of their next edge — the point at which rates will...

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How Do You Get A September Rate Cut?

When the eurodollar futures curve first inverted a year ago in the wake of May 29, 2018, it was the market beginning to hedge against serious and rising risks of something that would force the Federal Reserve to turn around. When that might happen, or how many cuts would eventually follow, those were questions the immediate inversion couldn’t answer. All the curve said at that point was a serious chance Jay Powell was going to be forced into an involuntarily U-turn at some indeterminate...

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Curves Rhyme, Too

People have started to look back fondly upon the Asian flu. It was as global disaster, a dollar shortage which spread all across mostly Asia but not exclusively. The reason why it is talked about positively nowadays is LTCM and rate cuts. Popular myth has it that Greenspan’s Fed properly handled any economic fallout due to the former by enacting the latter. Beginning September 1998, faced with “overseas turmoil”, the FOMC began a series of only three rate cuts. According to convention, this...

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Curves Have Pointed The Way, And It’s The Way They Still Point

In the middle of last November, when the Dallas branch of the Federal Reserve convened a conference on “global perspectives”, ironically, its officials were in a very good mood. The institution’s Chairman, Jay Powell, invited to speak at the gathering spelled out exactly why. Central bankers since Greenspan have made a habit of trying to say very little, but Powell wasn’t having it. After an enormously rough decade, he wasn’t about to beg forgiveness for celebrating an end to it. I’m...

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Not Only No Labor Shortage, Latest Labor Market Data Is Closer to Rate Cuts

Yesterday, the FOMC altered its view of household spending and business capex. It wasn’t a huge difference, they never are. Figuratively, these sorts of downgrades are little by little even though if things were ever to go the right way the language upgrades wouldn’t be subject to so much reservation. There isn’t much in the official statements anyway, just a few sentences. Still, the Economists at the Fed felt it necessary to admit consumer and business spending “slowed in the first...

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The Long Running Circus of Uncertainty Circles Back

Most of the best circuses used to have three main rings. Nowadays, we can only get the occasional show for two on the same day. It is a rare treat when central bankers from two major jurisdictions compete for the world’s misapprehending attention. Today is one of those days: Mario Draghi and the ECB as the warmup act for the Federal Reserve’s release of its last minutes. Draghi is in rare territory, coming very close to pulling a Trichet. Jean-Clause was, after all, Mario’s predecessor...

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Where Doves Are Dreaded

If “rate hikes” and QT are the world’s big problem in 2019, then why is the FOMC announcing the end of “rate hikes” and QT failing to have a positive effect? The answer will surprise most people. Central banks, dominated by central bankers who are Economists, meaning statisticians, are always behind. They do not lead. Monetary policy, which has no money in it, is reactive rather than proactive. Pay no attention to that inflationary boom Jay Powell spent the first significant portion of his...

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Expecting What’s Unexpected In Canada

There is much more chicken to each hawk than any of the birds would care to admit. What I mean by that is fairly straightforward, or it should be. Alan Greenspan was resolute. Right or wrong (the latter, trust the curves), after taking federal funds down to 1% officials pushed the rate right back up to 5.25% without pause. At every meeting interval during the middle 2000’s, the FOMC added another 25 bps. There was no equivocation or lamenting R*’s and complicated repo mechanics. They may not...

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Explaining All The Facts

St. Louis Fed President James Bullard was in New York last week, making a presentation to the US Monetary Policy Forum. A well-known dove, speaking to CNBC while attending the conference, as a current voting member of the FOMC Bullard announced his dissenting view to the last “rate hike.” He was not eligible to vote in December, rotating into this situation at the beginning of this year just in time for this new dovish tilt. I thought at the December meeting, myself I thought it was a step...

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