Best Hawkish Behavior
In the anxious aftermath of the June CPI report, among the worst in modern US history, markets priced a full-percentage point rate hike from the Fed as a coin toss at this month's policy meeting.
Late last week, when preliminary PMI data for July suggested private sector US economic activity contracted this month, markets briefly priced a 75bps hike as less than certain.
The about-face was indicative of the tug of war between an inflation crisis that threatens to undermine whatever's left of t
The Fed is hiking rapidly, whether it is 50/75/100 is almost besides the point. The market expects hikes at the next 4 meetings this year. That makes the over/under 200 bps total. In my view they would be smart to go slower as they can hike again, and it would give them options. But they are out to prove how tough they are. The economy is rapidly cooling and odds are they are tightening too quickly.
Thanks, Dr H. That’s a concise summation of the pros & cons of the choices the Fed must balance.
Outside of the two loudmouthed governors they do seem to be aware of the ramifications of every choice.
But geez, how have we gotten to this point where so many of us are focused on and obsessed by .25% ?
Anyone remember when capital markets were venues where providers and users of capital met rather than a parody of a high stakes room at a smoke-filled casino in Macau?
Not to ignore the risk to the Fed that Dr H alluded to. Populist have already discredited scientists warning of climate change ( a Chinese hoax) and epidemiologists in favor of Dr Charles Atlas and such.
How long before a Ron DeSantis or Tom Cotton starts to rail against the unaccountable ivory tower eggheads determining the economic fate of millions of hard working Americans?