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Just over eight months since Fed Chair Powell panicked and pivoted as global stocks (and bond yields) tumbled, the flip-flop is complete as The Fed has cut rates (by 25bps) for the first time since Dec 2008 (and cut the IOER to 2.1% from 2.35%).
Additionally, the Fed ends the normalization of the balance sheet two months ahead of schedule.
Fed - US - Economy - Rest - World
Fed praises US economy, blames rest of the world for cutting:
"In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent"
Esther - George - Eric - Rosengren - Rates
Esther George and Eric Rosengren both dissented, wanting to leave rates unchanged.
From expectations of 100bps of rate-hikes priced-in in Nov 2018, Powell's massive pivot now markets pricing in 100bps of rate-cuts...
Macro - Data - June - FOMC
US Macro data has been better than expected since the June FOMC... but cut anyway!
The last time The Fed started a rate-cutting cycle, valuations were dramatically lower...
Conditions - Fed - Rates
Financial Conditions are even easier now than they were in 2007 when The Fed started to cut rates...
Finally, according to the traditional Taylor Rule model (with Core PCE at 1.6% and Unemployment at 3.7%), The Fed Funds rate should be around 225bps HIGHER...
Fed - Funds - Futures - Market - %
The Fed Funds futures market priced in a 68% chance of another 25bps...
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What's more plentiful, hydrogen or stupidity?