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Well the big loser in this will be any other country with their own currency as this will only draw more money into US treasuries. The FED DOT plot shows proje

Well the big loser in this will be any other country with their own currency as this will only draw more money into US treasuries. The FED DOT plot shows projected rates of 5.1%( median forecast) so we may be near the end of rate hikes. So expect atleast another 0.25bps to 50bps raise early next year. Though 2024 and 2025 both show 100bps cuts which is up slightly from the previous report. interestingly there is both a market sell of and treasury sellof, the former we'd expect, the later has pushed up yields up 5bps, which is material for Treasuries. Unemployment forecast for End of year employment moved up only slightly from 4.4% to 4.6%. And the side by side comparison of the FED notes, which seems to be all the rage these days, shows very little change from their prior release which indicates we shouldn't expect any surprises from the FED next meeting, from Renaissance Macro

cm2187 4y ago
Keeping in mind increasing rates isn't the only way the fed can tighten the screw. I am always surprised how little attention is given in non financial newspapers to the movements in the fed balance sheet [1]. Even if rates remain stable, if the Fed keeps draining QE, it will apply a strong downward pressure on markets. [1] https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
- chollida1 4y ago
  Fully agree, and to be honest I didn't have that on my quick checklist for FED reporting. Appreciate the response!!
- JumpCrisscross 4y ago
  > how little attention is given in non financial newspapers to the movements in the fed balance sheet The rate is the nail, the balance sheet the hammer. Balance sheet movement informs professionals of the trades the Fed is placing to reach its target. For most people, who aren't looking at financial markets but instead the real economy, the rate per se is enough.
  - cm2187 4y ago
    No it's not. The movements you see in chart I linked have little to do with rates. It is the fed injecting or draining liquidity in/out of the system to push asset prices up and force risky investments, or do the reverse. The fed will likely keep draining its balance sheet after interest rates have stabilised.
    - JumpCrisscross 4y ago
      > movements you see in chart I linked have little to do with rates Buying and selling assets is the main way the Fed enforces its monetary policy [1]. > injecting or draining liquidity in/out of the system to push asset prices up and force risky investments, or do the reverse Buying bonds pushes their price up which lowers rates; selling bonds pushes their price down which raises rates [2]. > fed will likely keep draining its balance sheet after interest rates have stabilised This is correct [3]. The Fed's balance sheet is roughly double what it is optimally estimated to be [4]. [1] https://www.federalreserve.gov/monetarypolicy/fomc.htm https://www.federalreserve.gov/monetarypolicy/fomc.htm [2] https://www.investopedia.com/ask/answers/why-interest-rates-have-inverse-relationship-bond-prices/ https://www.investopedia.com/ask/answers/why-interest-rates-... [3] https://advisors.vanguard.com/insights/article/thefedsplantoshrinkitsbalancesheetquickly https://advisors.vanguard.com/insights/article/thefedsplanto... [4] https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL
      - cm2187 4y ago
        > Buying and selling assets is the main way the Fed enforces its monetary policy > Buying bonds pushes their price up which lowers rates; selling bonds pushes their price down which raises rates I know. But you seem to think this is the only purpose and only effect. If it was the case the rates would have gone deeply negative while the Fed kept printing QE for 15 years. But they didn't, rates stayed around zero during that time. [edit] And by the way, the Fed doesn't control rates by buying and selling ABS and treasuries (except for a short time for operation twist). ABS and treasuries are the bulk of the Fed balance sheet. The Fed controls rates by intervening in money markets (short term funding between banks).
tiahura 4y ago
we may be near the end of rate hikes. Did you hear Powell’s remarks? The labor market is still overly tight. And, we’re a long way from 2% inflation.
- no_wizard 4y ago
  The paradox here for me is...isn't that fine? Having a tight labor market isn't per se bad. I don't buy that higher employment makes all prices higher by such a significant margin that we will see 8% YOY inflation as a result. As with most thing, there is so much nuance that drives inflation. For instance, global supply chains are still disrupted or slowed across major industries. I think supply has way more to do with this, and "cutting demand" is like putting a band aid on a arterial wound. People are still going to bleed. It feels like it puts the political & economic power back into business interest hands read more cynically, since the only gains labor has made in the last 2 years is due to said labor market tightening, even though labor is one of multiple factors in increased prices in the same period. There's no "mix" policy here. I imagine some demand reduction is needed (if things are overheated like housing was in the past, for instance), but there is 0 acknowledgement that supply side issues will just simply continue to exist even when demand is lower because they still can't get raw material fast enough, and nobody is really doing anything about it.
  - JumpCrisscross 4y ago
    > a tight labor market isn't per se bad Everyone agrees on this. But the tight labor market doesn't exist per se. It exists with raging inflation. That turns the labor market's tightness into a policy enhancer for the Fed, since it has more room to maneuver.
- UncleMeat 4y ago
  The last four months have had a combined annualized CPI-U of 3%. Not too far from 2%.
  - deleted 4y ago
    [deleted]
pedrosorio 4y ago
> Well the big loser in this will be any other country with their own currency as this will only draw more money into US treasuries. Meanwhile the dollar is down to 0.94 euro from 1.04 just 2.5 months ago.

cm2187 4y ago

Keeping in mind increasing rates isn't the only way the fed can tighten the screw. I am always surprised how little attention is given in non financial newspapers to the movements in the fed balance sheet [1]. Even if rates remain stable, if the Fed keeps draining QE, it will apply a strong downward pressure on markets. [1] https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

chollida1 4y ago
Fully agree, and to be honest I didn't have that on my quick checklist for FED reporting. Appreciate the response!!
JumpCrisscross 4y ago
> how little attention is given in non financial newspapers to the movements in the fed balance sheet The rate is the nail, the balance sheet the hammer. Balance sheet movement informs professionals of the trades the Fed is placing to reach its target. For most people, who aren't looking at financial markets but instead the real economy, the rate per se is enough.
- cm2187 4y ago
  No it's not. The movements you see in chart I linked have little to do with rates. It is the fed injecting or draining liquidity in/out of the system to push asset prices up and force risky investments, or do the reverse. The fed will likely keep draining its balance sheet after interest rates have stabilised.
  - JumpCrisscross 4y ago
    > movements you see in chart I linked have little to do with rates Buying and selling assets is the main way the Fed enforces its monetary policy [1]. > injecting or draining liquidity in/out of the system to push asset prices up and force risky investments, or do the reverse Buying bonds pushes their price up which lowers rates; selling bonds pushes their price down which raises rates [2]. > fed will likely keep draining its balance sheet after interest rates have stabilised This is correct [3]. The Fed's balance sheet is roughly double what it is optimally estimated to be [4]. [1] https://www.federalreserve.gov/monetarypolicy/fomc.htm https://www.federalreserve.gov/monetarypolicy/fomc.htm [2] https://www.investopedia.com/ask/answers/why-interest-rates-have-inverse-relationship-bond-prices/ https://www.investopedia.com/ask/answers/why-interest-rates-... [3] https://advisors.vanguard.com/insights/article/thefedsplantoshrinkitsbalancesheetquickly https://advisors.vanguard.com/insights/article/thefedsplanto... [4] https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL
    - cm2187 4y ago
      > Buying and selling assets is the main way the Fed enforces its monetary policy > Buying bonds pushes their price up which lowers rates; selling bonds pushes their price down which raises rates I know. But you seem to think this is the only purpose and only effect. If it was the case the rates would have gone deeply negative while the Fed kept printing QE for 15 years. But they didn't, rates stayed around zero during that time. [edit] And by the way, the Fed doesn't control rates by buying and selling ABS and treasuries (except for a short time for operation twist). ABS and treasuries are the bulk of the Fed balance sheet. The Fed controls rates by intervening in money markets (short term funding between banks).

tiahura 4y ago

we may be near the end of rate hikes. Did you hear Powell’s remarks? The labor market is still overly tight. And, we’re a long way from 2% inflation.

no_wizard 4y ago
The paradox here for me is...isn't that fine? Having a tight labor market isn't per se bad. I don't buy that higher employment makes all prices higher by such a significant margin that we will see 8% YOY inflation as a result. As with most thing, there is so much nuance that drives inflation. For instance, global supply chains are still disrupted or slowed across major industries. I think supply has way more to do with this, and "cutting demand" is like putting a band aid on a arterial wound. People are still going to bleed. It feels like it puts the political & economic power back into business interest hands read more cynically, since the only gains labor has made in the last 2 years is due to said labor market tightening, even though labor is one of multiple factors in increased prices in the same period. There's no "mix" policy here. I imagine some demand reduction is needed (if things are overheated like housing was in the past, for instance), but there is 0 acknowledgement that supply side issues will just simply continue to exist even when demand is lower because they still can't get raw material fast enough, and nobody is really doing anything about it.
- JumpCrisscross 4y ago
  > a tight labor market isn't per se bad Everyone agrees on this. But the tight labor market doesn't exist per se. It exists with raging inflation. That turns the labor market's tightness into a policy enhancer for the Fed, since it has more room to maneuver.
UncleMeat 4y ago
The last four months have had a combined annualized CPI-U of 3%. Not too far from 2%.
- deleted 4y ago
  [deleted]

pedrosorio 4y ago

> Well the big loser in this will be any other country with their own currency as this will only draw more money into US treasuries. Meanwhile the dollar is down to 0.94 euro from 1.04 just 2.5 months ago.