Fed plans to raise rates as soon as March to cool inflation
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May 21, 2022, 04:12:28 PM
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  Fed plans to raise rates as soon as March to cool inflation
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Author Topic: Fed plans to raise rates as soon as March to cool inflation  (Read 3546 times)
Supporter and promoter of anti-white racism
Nathan
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« Reply #50 on: May 06, 2022, 01:29:00 AM »

It seems in interest rate markets there are now more bets on  multiple 75-basis-point rate this year.  That is not the consensus but it is good to see this is the way the Fed might move.  Moving rates to 2.5% by the end of the year is a complete joke.  Much more aggressive action is needed the massively reduce the liquidity in the market.

More aggressive action would lead to a recession, many economists are worried that even as far as the Fed will go could  lead to recession. Rates need to go up yes, but it needs to be done gradually so that economic growth does not slow too much, all at once.

For me, a recession is a feature and not a bug.  A recession will allow for labor and capital engaged in value-destroying activities to be reallocated to value-creating activities.  Right now we have a situation where you are paying people to borrow money (in after-inflation terms.)  The longer this goes on the greater the economic distortions and worse the long-term economic growth prospects will be.
I pretend to be a sociopath sometimes for fun, but dude cmon. 

The sad (but inevitable) fact is that in the long-term a recession of some kind is inevitable. Dread it, run from it, market distortions (and excessive debt) bring recessions or even depressions all the same. In that way, they are more akin to forest fires than anything else. Recessions are part of the economic cycle. It's better to have several small ones than one big one.

Of course, what is most likely to happen if we have another recession is that the government simply puts boatloads of money in the hands of corporate America - again (not like they didn't already do that during corona). Essentially, that is corporate welfare. And it's funded by us, John Q. Public, whether we will it or not. I'm not necessarily hostile to that, because stability could be quite desirable here, but it's not exactly without downsides either.
Yes, but the difference between a normal informed person and Jaichind is that the former doesn’t actively cheer for a recession.
I mean, at this point, it is in his interest, as a wealthy man, for this to happen.
Maybe but humans have this thing called empathy.

To be fair to jaichind (I can't believe I'm saying that), Paul Keating back in the 90s described a downturn in Australia as "the recession we had to have" for the same reasons concerning longer-term reconfiguration of economic priorities. I doubt jaichind's actual reasons for wanting this are as [checks notes] noble as [checks notes again] Paul Keating's, though.
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jaichind
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« Reply #51 on: May 06, 2022, 12:10:50 PM »

Mohamed El-Erian, a closely followed bond-market strategist, says the Federal Reserve has a trust problem with financial markets and the nation over inflation by ruling out a 75 bp rate increase in the future.
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jaichind
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« Reply #52 on: May 07, 2022, 05:27:20 AM »

For the first time since the Summer of 2019 the real 10-year treasury bond yield (yield minus inflation swaps for that same duration) turned positive.  I like to see that go up another 0.5%-0.7% to be in 2018 levels but this does seem to indicate that long-run projections pricing are beginning to move toward normal levels and the medium maturity bond rout is more than halfway done.  It is the short-term rates that are crazy low and there will be a lot more turmoil ahead as the Fed tries to avoid a large crash in the next couple of years.
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luplay
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« Reply #53 on: May 09, 2022, 04:48:21 AM »

Good thread
I have learned a lot.
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Southern Delegate and Atlasian AG Punxsutawney Phil
TimTurner
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« Reply #54 on: May 09, 2022, 04:50:39 AM »

Good thread
I have learned a lot.
Welcome to the forum!
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jaichind
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« Reply #55 on: May 10, 2022, 12:10:19 PM »

https://www.marketwatch.com/story/fed-isnt-ruling-out-75-basis-point-moves-forever-mester-says-11652198364

"Fed isnt ruling out 75 basis point moves forever, Mester says"

Markets that were up over 1% fell to negative territory on this news.  The Fed's communications on what they plan to do are terrible this cycle.

April YoY CPI numbers are coming out tomorrow which are expected to be 8.1% which is a drop from March YoY CPI numbers but that will be a base effect with MoM still expected to be positive.  I suspect the Fed is hedging itself in case the numbers end up worse than expected.
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jaichind
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« Reply #56 on: May 11, 2022, 07:31:26 AM »

April YoY CPI came in at 8.3% which is lower than March YoY CPI of 8.5% but higher than the expected 8.1%.  There will be somewhat more pressure on the Fed.
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jaichind
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« Reply #57 on: May 11, 2022, 07:46:34 AM »

US equities futures which were up over 1% before the CPI numbers came out all go wiped out when the CPI numbers came out.  It is now in negative territory and heading lower.

What is also interesting is that April chain CPI YoY was up 8.1% just March chain CPI YoY.  Last few months the "gap" between chain CPI and regular CPI was large which means that the price surge was more limited to a set of items that there were alternative products that could be used as substitutes.  The closing of the gap between chain CPI and regular CPI means that inflation pressure is now getting more across the board, at least in the goods area.  The Fed is running out of arguments like "the inflation surge is because of X, once X is out of the way things will be back to normal" as the price increase are becoming more broad-based and likely self-perpetuating.
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jaichind
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« Reply #58 on: May 11, 2022, 08:03:42 AM »

Hopefully, now the Fed faces reality and put a 75 bp and in my view a 100 bp increase on the table for the next Fed meeting.  The market pricing clearly thinks this is the case (at least the 75 bp part)
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jaichind
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« Reply #59 on: May 12, 2022, 07:35:39 AM »

April YoY PPI at 11%  Market expected 10.7%.   Par for the course given recent trends
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Omega21
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« Reply #60 on: May 12, 2022, 11:13:45 AM »

Hopefully, now the Fed faces reality and put a 75 bp and in my view a 100 bp increase on the table for the next Fed meeting.  The market pricing clearly thinks this is the case (at least the 75 bp part)

So we should expect mid-term stagflation?

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jaichind
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« Reply #61 on: May 12, 2022, 11:25:06 AM »

Hopefully, now the Fed faces reality and put a 75 bp and in my view a 100 bp increase on the table for the next Fed meeting.  The market pricing clearly thinks this is the case (at least the 75 bp part)

So we should expect mid-term stagflation?



I would say that the equities markets are pricing in around a 50% chance of a recession next year.  I think if it falls another 5% or so then the chances of a recession next year is very high. 
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Omega21
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« Reply #62 on: May 12, 2022, 12:56:04 PM »

Hopefully, now the Fed faces reality and put a 75 bp and in my view a 100 bp increase on the table for the next Fed meeting.  The market pricing clearly thinks this is the case (at least the 75 bp part)

So we should expect mid-term stagflation?



I would say that the equities markets are pricing in around a 50% chance of a recession next year.  I think if it falls another 5% or so then the chances of a recession next year is very high. 

About what I assumed, although we might get the official "recession" as soon as next quarter.

Anyway, I have already started buying the dip a bit, but not sure how much I should leave for later. Think we could lose more than 10% to ATL from this point?
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Angry_Weasel
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« Reply #63 on: May 12, 2022, 01:53:40 PM »

Hopefully, now the Fed faces reality and put a 75 bp and in my view a 100 bp increase on the table for the next Fed meeting.  The market pricing clearly thinks this is the case (at least the 75 bp part)

So we should expect mid-term stagflation?



I would say that the equities markets are pricing in around a 50% chance of a recession next year.  I think if it falls another 5% or so then the chances of a recession next year is very high. 

About what I assumed, although we might get the official "recession" as soon as next quarter.

Anyway, I have already started buying the dip a bit, but not sure how much I should leave for later. Think we could lose more than 10% to ATL from this point?

I know I am.
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jaichind
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« Reply #64 on: May 12, 2022, 03:19:27 PM »



About what I assumed, although we might get the official "recession" as soon as next quarter.

Anyway, I have already started buying the dip a bit, but not sure how much I should leave for later. Think we could lose more than 10% to ATL from this point?

The way the inventory cycle works makes the chances of official recession unlikely next quarter.  Still, economic growth clearly is slowing down.  There is still some reason to believe that when the likely recession comes it will most likely be more shallow than 2008 and more on the order of 2001.  Right now inventory levels are not that high and the usual reason why recessions are deep is large inventories that companies then burn through while they lower production.  This time around this factor will work in favor of shallow inflation.  The Fed still has dreams of holding down unemployment while rates rise to push down inflation.  This just seems unlikely and the Fed should accept reality and not risk a even worse recession and unemployment later down the line.
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jaichind
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« Reply #65 on: May 12, 2022, 03:41:17 PM »

Now Powell Reiterates 50 bp Hikes Are Likely in June and July. Sigh.  the Fed communications on this are all over the place and this signals significant divisions within the Fed.
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jaichind
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« Reply #66 on: May 13, 2022, 09:35:44 AM »

University of Michigan Consumer Sentiment Index continued to stay at a very depressed level.  It is at the worst level since the early 1980s with the exception of being slightly above late 2008-early 2009 levels (Great Recession) as well as the Summer of 2011 (Budget crisis).
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jaichind
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« Reply #67 on: May 13, 2022, 04:29:19 PM »

University of Michigan Current Economic Conditions Index  came in at 63.6.  The only 2 months that were worse than this since 1980 is Oct 2008 and Nov 2008.  Every other month over the last 42 years is better than this reading for May 2022.
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jfern
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« Reply #68 on: May 13, 2022, 10:49:20 PM »

University of Michigan Current Economic Conditions Index  came in at 63.6.  The only 2 months that were worse than this since 1980 is Oct 2008 and Nov 2008.  Every other month over the last 42 years is better than this reading for May 2022.

A stock market bear market, 8% inflation, record high housing prices, and a slowing economy is an amazing combination of things that aren't supposed to all happen at once.
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jaichind
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« Reply #69 on: May 14, 2022, 05:04:42 AM »

University of Michigan Current Economic Conditions Index  came in at 63.6.  The only 2 months that were worse than this since 1980 is Oct 2008 and Nov 2008.  Every other month over the last 42 years is better than this reading for May 2022.

A stock market bear market, 8% inflation, record high housing prices, and a slowing economy is an amazing combination of things that aren't supposed to all happen at once.

Many people do not remember this but inflation was a major concern in late 2007 and most of 2008.  The Fed fund rate had to hit 5.25% in late 2007 and in July 2008 CPI YoY hit 5.6%.  I remember food prices were surging in early 2008 and inflation became a bigger concern which all were erased by the economic and financial crash of late 2008.  Just to be clear, the markets started to fall in late 2007 and had fallen over 20% from their peak by July 2008 before the big crash in Sept 2008.  At the same time unemployment in late 2007 was around 4.6% which was fairly low.

So today really looks a lot like mid-2008 in many ways with the exception that the Fed funds rates today are way behind the curve relative to 2007 2008.
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jaichind
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« Reply #70 on: May 16, 2022, 08:53:17 AM »

https://www.nytimes.com/2022/05/16/business/ben-bernanke-predicts-stagflation.html

"Ben Bernanke Sees 'Stagflation' Ahead"

Former Fed Chairman Bernanke said Fed leaders were too slow to react to surging U.S. inflation and as a result face a period of stagflation or a combination of stagnant growth and high inflation.
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jaichind
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« Reply #71 on: May 17, 2022, 07:12:11 AM »

https://news.yahoo.com/goldman-sachs-economist-slowdown-consumer-spending-151957462.html

"Goldman Sachs economist sees 'a slowdown in consumer spending'"

The same GS economist Jan Hatzius also said in an interview with Bloomberg said "Borrowing is going to be a short-term driver of spending, and I think has been to some degree" and "Consumer spending is going to be relatively slow. Income is going to be quite weak in 2022."

It seems if consumers are using leverage to deal with inflation then the economic slowdown is going to be worse than expected.  The Fed is riding the tiger and now it is getting harder and harder to get off.
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jaichind
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« Reply #72 on: May 18, 2022, 08:56:37 AM »

Walmart and now Target's profits both fell well short of expectations and had deep stock price declines.  So there goes the "inflation is high because of greedy capitalists/corporations" line.  Of course, that line never made since I am pretty sure capitalists/corporations were greedy before 2021.
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jaichind
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« Reply #73 on: May 18, 2022, 12:48:30 PM »

Fed Reverse Repo Facility Demand Jumps to a record $1.973 trillion.  This pretty much shows there is excess liquidity in the system as market players run out of places to stash short-term cash.    Another data point points to the need to drain liquidity from the market via aggressive raises in the Fed fund rate as well as unwinding the massive Fed balance sheet.  When that does happen the long term cost of the Federal debt will become clear there will have to be a fiscal adjustment as well after the economic downturn is over.
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Person Man
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« Reply #74 on: May 19, 2022, 04:39:47 PM »

The good news is that consumers are finally saying enough.
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