Posted on 12/14/2023 9:22:25 AM PST by Kaiser8408a
In this corner, we have Fed Chair Powell, Treasury Secretary Yellen, President Biden and Cheerleader Brainard all cheering and singing “Everything Is Beautiful!”. In the other corner, we have … investors who are are betting that The Fed will be cutting the target rate from 5.50% to 4% by December 2024, a cut of almost 150 basis points in one year.
Why? First, the US economy is softening. Second, The Fed will want Biden (or whoever Democrats prop up in his place) re-elected as President.
While Wednesday’s FOMC statement had barely any changes in it, with the notable addition of the word “any” in the context of policy firming meant to acknowledge that the Fed is at or near the peak rate…
… it was the dot plot, where the median 2024 dot plot now forecasts 3 rate cuts up from 2, that shocked traders: in a very rare admission by the Fed, the central bank confirmed that the pre-meeting market pricing of multiple cuts in 2024 were correct in interpreting the Fed’s intentions. It also confirmed – yet again – that the market was right and every single FOMC member was wrong. In retrospect, none of this should have been a shock.
But markets are behaving as if The Fed will begin cutting rates. Look at the US 2-year Treasury yield on Wednesday AFTER the Fed minutes were released.
Everything is NOT beautiful, according to investors.
Welcome to the REAL Snake Hole Lounge: The Federal Reserve. And their famous “Snake Juice!” Now forecast to be under 4% by 2025!!
(Excerpt) Read more at confoundedinterest.net ...
They are willing to risk inflation to avoid a recession. Great that stewardship of the economy takes a backseat to politics.
This...
Fiat currency means never having to say you’re sorry.
Sailing a big sailing ship in almost zero wind. Very small and carefully measured responses over time and distance.
Here is a great article about LBJ and the Federal Reserve Chairman of his day:
https://www.zerohedge.com/markets/now-it-all-makes-sense
The bottom of the article discusses this history.
LBJ physically intimidated the Fed Chair and forced him to reverse course so LBJ could get re-elected....
and then after all that LBJ did not even run again—while inflation exploded out of control for the next decade and beyond...
If the Fed pursues really stupid policies all the way through to December 2024, one of two things will happen —
1) The policies will make things look good and help the Democrats win in 2024. After that, things may totally crash. But the Democrats don’t care about that. They are still fundamentally transforming the country.
2) The policies might help spook people and Trump might win in 2024. After that, things may totally crash. Which will allow the Democrats and the Media to say that Trump is in charge of the worst economy since the Great Depression. They will impeach him for these crimes against humanity.
So ... they really can’t lose either way.
i still remember when Powell bragged that Trump couldn’t fire him.
The deep state has crashed rates. Powell has raised rates and still the rates are going down. And the deep state has thrown over ten trillion dollars at the economy. Guess what happens if Trump wins. They will try to tank it.
The FED is hoping to help reelect Biden.
But, as the economy heats back up, so will oil prices and inflation, by summer, and we can see Powell having to back off further rate reductions.
I suspect OPEC and the plus countries like Russia will all cheat on their proposed reductions and further drive down oil. The entire world is in a depression. Deflation is a likely outcome.
“I suspect OPEC and the plus countries like Russia will all cheat on their proposed reductions and further drive down oil. “
I doubt it. Putin needs the oil revenue and most of the OPec countries have oil as their main revenue earner as well.
Desperately trying to delay the onset of Depression number 2, “D2” lets call it, until AFTER the 2024 election.
Not only crash rates markets are unstable and yoyoing banks closing inflation a chain reaction.
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