Macro Tourist: If I Was On The Fed, I’d Be Pushing Hard For An Emergency Rate Cut
As market practitioners, too often we obsess with financial indicators when it comes to forecasting Federal Reserve policy. I have heard plenty of tongue-firmly-planted-in-cheek comments about how the Fed needs to cut rates because we are a whopping 8% from all-time highs. These pundits joke that the Fed needs to come to the rescue of the stock market bulls as they are not used to this many downticks.
Yeah, I get it. It seems ridiculous that less than a 10% decline would prompt ca
Dude they are already late.
Macro-Man, Forget the Fed Save.
ed hike is bad
More liquidity that chases assets won’t help the economy;and it won’t do a thing to stop Covid-19. And no mere consumers will get negative rates on their mortgages or credit cards -rate cuts are useless or worse except as a very temporary fix, which will cause even more pain when unwound.
Rate cuts slow the velociity of money and merely exacerbate the demographically-driven deflationary impulse that is sweeping the globe.
Dude, dropping rates to zero will result in a massive liquidity freeze-up, global and long-term death zone. What happens as equities continue to slide and there is no safe haven or stability, do you really think negative rates will create long-term stability during a long out of chaos?
Macro tourist has hit the nail on the head. The risks are asymetric, lots of downside if this is a real pandemic and nothing done, not much damage if the Fed jumped the gun. It is easy to raise rates and/or shrink the balance sheet if a cut was not in fact needed. Accelerating inflation is clearly not the issue here, a very nasty possible recession is a distinct possibility.
Easy to raise rates? I disagree. It didn’t go well the last time.
Is liquidity (of the kind that is best addressed by Fed Funds rate cuts) the problem here?
Not snarking, actually asking.