Failing Banks, Persistent Inflation Promise Fun-Filled Week

Markets will get an updated look at the Fed's preferred inflation gauge this week. Spoiler alert: The YoY prints won't be anywhere near target. And traders won't be anywhere near caring. Barring an anomalously hot MoM core PCE print or an extraordinarily robust read on consumption for February, markets will continue to focus on prospective rate cuts in the back half of 2023. Traders are betting the legacy drag from last year's policy tightening and the read-through for credit conditions from

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10 thoughts on “Failing Banks, Persistent Inflation Promise Fun-Filled Week

  1. Very well put Mr. H. Sad but true.
    Entering a perpetual state of war should be costly. The Cold War may have had more of an effect on inflation than people acknowledged.
    It would be interesting to see if raising taxes, as per a certain recipe, would have an effect. That will not happen at the moment with our government.
    Time tells all and I wish well.

  2. It appears that the old spending limits imposed by a consumer’s actual income no longer apply, and so simply making things more expensive is less effective than it was. It’s likely that as long as people can borrow (via credit cards or helocs), there will be no slackening in demand. YOLO reigns, so there will be no immediate pressure on companies to limit or lower prices.
    Add to undiminished demand the fact of naked corporate greed, exercised under the cover provided by current inflation, and we must wait for borrowing to be curtailed for prices to moderate. The looming drop in liquidity should take care of that aspect of our problems.

    1. I suspect it’s more just a delayed effect: HELOCs are not attractive at 7+% which ironically was the rate for credit card interest not too long ago, now credit cards are at 20% or even 30% APR!

  3. When lending tightens all sorts of demand drops.And the workforce is starting to rebound as the pandemic effects diminish. In the next couple of quarters you can expect to see u-3 unemployment rise more than 1%, best guess is to think about an approach to 6% by late 2024. Inflation very shortly will be low down on the list of our worries.

  4. As long as “too big to fail” banks are allowed to exist nothing will change. They will continue to control nations and the people in them knowing governments have no recourse but to bail them out of whatever idiocy they get caught up in.

  5. “That’s where we are. The saving grace for the “rate hikes will fix it” crowd (the “because Volcker” contingent) is that eventually, rate hikes do have a good chance at working, only not in the neat, mechanical sense so many observers claim. Rather, rate hikes can work eventually because if you alter a fundamental input (in this case the cost of money) of economic decision making enough, you’ll invariably bankrupt (figuratively or literally) a few economic actors whose decisions were made based on the old settings. Depending on how important those actors are, their tribulations (or, in the most severe cases, their demise) can reset psychology and expectations among consumers and businesses by injecting a dose of acute, overwhelming apprehension”.

    You can say you read it on Heisenberg Report. We’re operating at Volcker-Lite currently and when “overwhelming apprehension” has settled in, the re-set can begin.

NEWSROOM crewneck & prints