Yes, Wednesday is FED day and the markets are expecting a 50 basis point increase in the FED FUNDS RATE to a range of 0.75% to 1%. The most important issue will be the size of the balance sheet unwind and whether Chair Jerome Powell is good to his heightened concerns about headline inflation means a full throttle on balance sheet shrinkage, reaching the full $95 billion a month at a quick pace. So Jerome, let’s have at it and let the markets decide the impact on myriad asset classes. In 2018, this double shotgun of QT and interest rate hikes proved too much for the highly leveraged global markets. Now that the Fed’s balance sheet is twice as large let’s see how it will affect the leverage in the global system.
The most interesting aspect of the FOMC meeting and Powell press conference is whether there’s any concern about the 12% rise in the U.S. dollar since the beginning of the year. Every other central bank discusses interest rates and the value of its currency but the most important central bank never discusses the value of the DOLLAR. Will we get a sea change?
Tags: balance sheet unwind, Fed Funds Rate, Federal Reserve, inflation, Jerome Powell, QT, rate hikes, U.S. Dollar
May 4, 2022 at 9:50 am |
Yra, what are you expecting today on the shrinkage?
May 5, 2022 at 7:45 am |
shocked –as i wrote a much quicker pace to get to the 95 billion in QT then Powell delivered which is why it was deemed dovish by the market
May 4, 2022 at 10:17 am |
D-mark currency still in circulation
https://www.bundesbank.de/resource/blob/618390/6ca043c2172b153d70f6b3f9fa5e3140/mL/ausstehendes-dm-bargeld-data.pdf
BRIDGEWATER “An Update from Our CIOs: What Was Coming Is Now Upon Us”
https://www.bridgewater.com/_document/an-update-from-our-cios-what-was-coming-is-now-upon-us?id=00000180-85c6-d535-a1d3-9fcfd4780001
May 5, 2022 at 12:34 am |
Marc Faber monthly commentary
https://www.gloomboomdoom.com/
May 5, 2022 at 7:50 am |
Arthur–great post thanks and the woody allen quote by Faber is just priceless
May 6, 2022 at 5:07 pm |
Amazing how Powell went from being a genius on Wednesday to having a credibility problem om Friday.
Confidence is what you have before you understand the problem.
May 7, 2022 at 3:25 am |
Love it “Confidence is what you have before you understand the problem“
May 6, 2022 at 5:35 pm |
I would like to see Jerome Powell come out smoking a cigar at the next Fed Interest rate decision…..that would instill some confidence.
May 10, 2022 at 5:23 pm |
What if Russia collapses? I found this video interesting, thought I would share it here.
https://youtu.be/dkMlLkCRmRQ
May 11, 2022 at 6:12 am |
Pierre—thanks for the link to a good synopsis of the geo political reality of the eur asian land mass —Russia is a keystone of that part of the world and maintains 13 time zones to complicate the situation—-never as easy as the popular narrative wishes to believe