Tag Archive: rate cuts

Don’t Forget (Business) Credit

Rolling over in credit stats, particularly business debt, is never a good thing for an economy. As noted yesterday, in Europe it’s not definite yet but sure is pronounced. The pattern is pretty clear even if we don’t ultimately know how it will play out from here. The process of reversing is at least already happening and so we are left to hope that there is some powerful enough positive force (a real force rather than imaginary, therefore...

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History Shows You Should Infer Nothing From Powell’s Pause

Jay Powell says that three’s not a crowd, at least not for his rate cuts, but four would be. As usual, central bankers like him always hedge and say that “should conditions warrant” the FOMC will be more than happy to indulge (the NYSE). But what he means in his heart of hearts is that there probably won’t be any need.

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Very Rough Shape, And That’s With The Payroll Data We Have Now

The Bureau of Labor Statistics (BLS) has begun the process of updating its annual benchmarks. Actually, the process began last year and what’s happening now is that the government is releasing its findings to the public. Up first is the Household Survey, the less-watched, more volatile measure which comes at employment from the other direction. As the name implies, the BLS asks households who in them is working whereas the more closely scrutinized...

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The FOMC Channels China’s Xi As To Japan Going Global

The massive dollar eruption in the middle of 2014 altered everything. We’ve talked quite a lot about what Euro$ #3 did to China; it sent that economy into a dive from which it wouldn’t escape. And in doing so convinced the Chinese leadership to give growth one more try before changing the game entirely once stimulus inevitably failed.

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More (Badly Needed) Curve Comparisons

Even though it was a stunning turn of events, the move was widely celebrated. The Federal Reserve’s Open Market Committee, the FOMC, hadn’t been scheduled to meet until the end of that month. And yet, Alan Greenspan didn’t want to wait. The “maestro”, still at the height of his reputation, was being pressured to live up to it.

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The Inventory Context For Rate Cuts and Their Real Nature/Purpose

What typically distinguishes recessions from downturns is the inventory cycle. Even in 2008, that was the basis for the Great “Recession.” It was distinguished most prominently by the financial conditions and global-reaching panic, true, but the effects of the monetary crash registered heaviest in the various parts of that inventory process. An economy for whatever reasons slows down.

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Three (Rate Cuts) And GDP, Where (How) Does It End?

The Federal Reserve has indicated that it will now pause – for a second time, supposedly. Remember the first: after raising its benchmark rates apparatus in December while still talking about an inflationary growth acceleration requiring even more hikes throughout 2019, in a matter of weeks that was transformed into a temporary suspension of them.

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The Inventory Context For Rate Cuts And Their Real Nature/Purpose

What typically distinguishes recessions from downturns is the inventory cycle. Even in 2008, that was the basis for the Great “Recession.” It was distinguished most prominently by the financial conditions and global-reaching panic, true, but the effects of the monetary crash registered heaviest in the various parts of that inventory process.

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Macro Housing: Bargains and Discounts Appear

While things go wrong for Jay Powell in repo, they are going right in housing. Sort of. It’s more than cliché that the real estate sector is interest rate sensitive. It surely is, and much of the Fed’s monetary policy figuratively banks on it. When policymakers talk about interest rate stimulus, they largely mean the mortgage space.

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From JOLTS Series Shift To Series of Rate Cuts

I’ve said all along that they would be dragged into them kicking and screaming. After all, the Federal Reserve undertook its last rate hike in December 2018 – just as the markets were making clear he was completely mistaken in his view of the economy. What followed was the ridiculous “Fed pause” which pretty much everyone outside of the central bank and the Economics profession knew wasn’t the end of it.

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Waiting on the Calvary

Engaged in one of those protectionist trade spats people have been talking about, the flow of goods between South Korea and Japan has been choked off. The specific national reasons for the dispute are immaterial. As trade falls off everywhere, countries are increasingly looking to protect their own. Nothing new, this is a feature of when prolonged stagnation turns to outright contraction.

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Is The Negativity Overdone?

Give stimulus a chance, that’s the theme being set up for this week. After relentless buying across global bond markets distorting curves, upsetting politicians and the public alike, central bankers have responded en masse. There were more rate cuts around the world in August than there had been at any point since 2009.

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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.

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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.

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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.

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As Chinese Factory Deflation Sets In, A ‘Dovish’ Powell Leans on ‘Uncertainty’

It’s a clever bit of misdirection. In one of the last interviews he gave before passing away, Milton Friedman talked about the true strength of central banks. It wasn’t money and monetary policy, instead he admitted that what they’re really good at is PR. Maybe that’s why you really can’t tell the difference Greenspan to Bernanke to Yellen to Powell no matter what happens.

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All Of US Trade, Both Ways, And Much, Much More Than The Past Few Months

The media quickly picked up on Jay Powell’s comments this week from Chicago. Much less talked about was why he was in that particular city. The Federal Reserve has been conducting what it claims is an exhaustive review of its monetary policies. Officials have been very quick to say they aren’t unhappy with them, no, no, no, they’re unhappy with the pitiful state of the world in which they have to be applied.

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Janus Powell

Again, who’s following who? As US Treasury yields drop and eurodollar futures prices rise, signaling expectations for lower money rates in the near future, Federal Reserve officials are catching up to them. It was these markets which first took further rate hikes off the table before there ever was a Fed “pause.”

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What Kind Of Risks/Mess Are We Looking At?

The fact that the mainstream isn’t taking this all very seriously isn’t anything new. But how serious are things really? That’s pretty much the only question anyone should be asking. What are the curves telling us about what’s now just over the horizon?

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Global Doves Expire: Fed Pause Fizzles (US Retail Sales)

Before the stock market’s slide beginning in early October, for most people they heard the economy was booming, the labor market was unbelievably good, an inflationary breakout just over the horizon. Jay Powell did as much as anyone to foster this belief, chief caretaker to the narrative. He and his fellow central bankers couldn’t use the word “strong” enough.

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