10 year Treasury yields are down 40 bps over the week.
Over this week, the end-of-year CME Fed funds futures has dropped 15 bps. By year’s end, the Fed funds rate will be down 78 bps.
Figure 1: Fed funds (bold black), CME futures implied as of 7/26 (teal), as of 8/2 (red), in %. Source: Fed via FRED, CME, author’s calculations.
The market has voted and the Fed gets a C. Clearly they should have cut rates this time and now will be forced to do more steep cuts going forward. Their absurd focus on one of their mandates over the other is destabilizing markets – so they are not even serving their masters that well.
“the Fed gets a C”.
That may be grade inflation!
Equity markets have broken “all time highs” the past months. Volatility indicates “speculation”.
Every one wants the Fed to cut, does anyone think cuts will help the consumer?
Or run up speculation?
Help consumers? Yes.
We tend to chop people up unto consumers, home owners, savers, borrowers, workers, retirees, investors and entrepreneurs. In fact, we are each a combination of several of these. “Consumers” are also, to a considerable extent, workers and borrowers, who will be helped by lower rates.
The (relative) increase in a asset prices is a mechanism through which monetary policy affects the real economy. No sense belly-aching about it unless somehow asset markets become a problem. Like unaffordable housing or an MBS bubble or a money pump from borrowers to savers.
Why would you look at that as an either or?
Lower rates help consumers – especially those who consume on credit. Lower rates also can help those who speculate in markets, especially those who do so on borrowed money. Macroduck lists a number of other categories of people who are influenced by rates. It is complicated and our little monkey brains are constructed for yes/no – black/white narratives not complicated economic models. So you have to put in the work to understand most things.
Kudlow alert starring Kevin DOW36000 Hassett lying to their Faux News sheep again. They kept saying the FED should not cut interest rates because inflation was way over the magical 2% target. Whether we use CPI or PCE, inflation over the past couple of months are been near zero.
But no, no, no Kudlow insists we need to measure inflation using the past 12 months. OK – but inflation measured by PCE has been only 2.5%. But no, no, no – Kudlow insists the FED has to use CPI (never mind what the FED says I guess). And measured Kudlow’s way inflation according to Kudlow is 3.5%. Odd – the BLS data on CPI says prices in June 2024 were only 3.0% higher than they were as of June 2023.
But what do the socialists at BLS know? Kudlow speaks and the sheep follow.
the person should be told the FED should be looking at expected inflation not current inflation
I guess one could say that expected inflation is a tough topic. But looking at what happened a year ago does not strike me as a rational way to forecast future price increases.
One reason the Fed hasn’t been in a hurry to cut rates is that standard measures of financial conditions have, till now, looked quite tame:
https://fred.stlouisfed.org/graph/?g=1rbGZ
Corporate spreads, which are updated daily, are showing a slight tightening, but that is probably a mechanical reaction to falling stock prices, rather than a sign of broader financial stress.
I’m mildly curious as to the effect on spreads and carry trades from the anticipated simultaneous BOJ tightening and Fed easing, but so far, I’m not aware of any trouble.
https://fred.stlouisfed.org/series/BAMLC0A4CBBB/
ICE BofA BBB US Corporate Index Option-Adjusted Spread
So far this spread is quite low. I’m less worried about financial stress than I am worried about decisions to invest in either housing or productive capital. And as Janet Yellen noted, the high interest rates have led to dollar appreciation.
Trump’s latest lame excuse for not debating Kamala Harris on 9/10/2024 is that he is suing the network that intends to host the debate. Here is the latest on this pathetic lawsuit:
https://www.cnn.com/2024/07/24/media/trump-lawsuit-abc-george-stephanopoulos-rape-claim/index.html
Yes George Stephanopoulos said Trump raped Ms. Carroll because Trump did rape her. OK – his thing is too small have effectively penetrated but that does not change the facts. So let’s have the trial which Trump will lose and make this disgusting fatso look pathetic AGAIN.
Now Trump wants a debate with two of his favorite Faux News clowns hosting it. PLEASE! I have a compromise idea. MSNBC should host the debate with Rachel Maddow and Jen Psaki hosting it. Fact checks and all. Come on Donald – be a man and accept that invitation.
That particular excuse will just bring the rape case back into the news again. I think Kamala Harris should send Trump a thank you note.
Trump’s election interference case is back on, now that the Supreme Court has ruled on presidential immunity:
https://www.politico.com/news/2024/08/02/trump-election-subversion-prosecution-trial-00172501
It won’t wrap up before the election., but it may generate headlines that keep Trump’s criminality and anti-democratic efforts on display.
Jimmy Carter will turn 100 on October 1. Hish wish is that he lives long enough to vote for Kamala Harris.
Of course when JD Vance heard this his reaction was that people who are 100 or more have no future and should be denied the right to vote. MAGA!
https://www.slowboring.com/p/kamala-harris-should-shake-the-etch
Matthew Yglesias offers some advice to Kamala Harris including this short list of policy proposals simply stated:
‘A law restoring Roe v Wade as the law of the land
Reduce the deficit by rescinding Trump’s tax cuts for high-income individuals and corporations, while retaining current rates on the middle and working class
Finishing the job of securing the border with the bipartisan border security bill
Defend Medicare, Medicaid, and Social Security
Maximize the output of clean energy with permitting reform, vigorous implementation of the new bipartisan nuclear energy reform, and with a science-based approach to LNG exports
Vigorously monitor price-gouging and anti-competitive behavior to promote consumer welfare and low prices
Invest in paid leave and an affordable child care system that supports all parents and all kinds of families’
I like the list especially number six. Oh wait – Linkedin’s CEO will give Harris a lot of campaign money if she fires the head of the FTC who is doing #6 already. Sorry Mr. LinkedIn but your tainted money is not wanted.
When I get bored waiting for interest rate changes, I watch the clock.
https://www.usdebtclock.org
Little Brucie is bored? Dude – you are the most pathetic little child ever save maybe that other MAGA moron JD Vance. But be of good cheer as Kelly Anne has a plan to get rid of JD. Trump and Bruce Hall for the worst duo in Presidential race history? We’re cheering for you little Brucie boy!
Ah, more gnomic nonsense from Brucey. He doesn’t feel up to saying something sensible, but he wants to say something, so he does this. How brave.
I’m listening to your boy Trump at Georgia State insulting his host and then talking economics. Did you write that part of the speech for him Brucie? It is your style for sure.
After all Trump told people we are experiencing the worst inflation ever. And even better – four years ago we were enjoying the Trump economic boom. Never mind that notion from BEA that real GDP fell a lot back in 2020QII. After all – what do they know? Bruce Hall told his master that we were having an economic boom back then. Good show Brucie!!!
Huh – there were quite a few take downs of this stupid comment:
Bruce Hall
August 1, 2024 at 5:43 am
Reality is perception….
But as you always do – you ducked and ran as soon as a real conversation started. I guess you are about to cut and run from this comment too. It’s the style of Bruce the Weasel Hall!
538 has Harris leading Trump by 1.5 ppt nationwide:
https://projects.fivethirtyeight.com/polls/president-general/2024/national/
Don’t have the links at this moment but I read where some of the Trump pollsters have him 5 ppt behind. Expect a lot more racist attacks!
I think we have reminded MAGA moron Bruce Hall of this many times:
https://fred.stlouisfed.org/series/GFDEGDQ188S
Federal Debt: Total Public Debt as Percent of Gross Domestic Product
Note Brucie’s boy Trump left us with a debt/GDP ratio of 126% and never a beep from this partisan piece of trash. But now that Biden is President Bruce watches a stupid clock showing nominal debt in absolute terms. I guess doing so caused this MORON to miss that the debt/GDP ratio has declined under Biden. Yea – Brucie boy has never even tried to have an adult conversation. And he never will.