Economist’s “News and Veiws” Thursday 10-26-2023


Why The Fed’s ‘Pause’ May Not Be Coming

Arcadia Economics:  10-26-2023

The financial markets (and myself included), have spent the past year and a half waiting for the Federal Reserve to finally announce a pause to their interest rate hiking campaign.

And while the Fed has left it’s target funding rate at the 5.25-5.50% range since their last hike at the July meeting, they still have yet to announce that they are done hiking and have reached the peak rate of the cycle going forward.

Yet with inflation still elevated, and well above their 2% mandate, while interests rates are surging amidst a deluge of supply, it’s worth considering whether that announcement is ever coming.

Because with oil higher in the past few months, and the inflation numbers ticking higher again, based on everything Jerome Powell has said over the past year, there’s a very real possibility that he may not change what he’s saying before there’s an implosion in the debt or banking markets.

 In fact given the supply dynamics ahead in the US treasury market, it could even be more likely than not at this point that the market forces the Fed into being the buyer of last resort again before an ‘inflation is cooked’-induced pause ever occurs.

MOVING FAST: China Sells $21 BILLION In U.S. Treasuries, The Largest Drop In 4 Years

Lena Petrova:  10-26-2023