Two Fed members project no more cuts this year. The median projection is a Fed Funds Rate of 4.4. percent at the end of the year.
The above imaged is from the Fed Summary of Economic Projections (SEP)
Fed Summary of Economic Projections
The Fed projects the unemployment rate will hit 4.4 percent this year.
The current unemployment rate is 4.1 percent.
Unemployment Rate
Asymmetric Policy Adjustments
One key take away from today’s report is the Fed’s asymmetric policy decisions. At the first sign of trouble, the Fed is cutting rates by a half-point.
When inflation was soaring the Fed kept QE going on schedule to the bitter end and started hiking in baby steps with inflation soaring.
This is how and why the Fed fuels asset bubbles of increasing amplitude over time.
Spotlight Jobs
August 22: A Breakdown, by Sector, of the Negative 818,000 BLS Job Revisions
September 6: Payroll Report: Manufacturing Sheds 24,000 Jobs, Government Adds 24,000, Big Negative Revisions
September 7: BLS Negative Job Revisions 15 of Last 21 Months
September 9: Fed Beige Book Conditions Are Worse Now Than the Start of the Great Recession
In July, I thought the Fed would cut rates 50 basis points today. I want to repeat that was an expectation of what the Fed would do, not what I thought was the proper economic policy.
Interesting movements on the currency markets this morning.
US Treasuries: under 2 year–yields down slightly. 3 year and over, yields up slightly.
Schwab’s one month CD yield is down 0.1%. Still the best yield on Schwab’s list of highest yielding CDs
Yawn!
“The median projection is a Fed Funds Rate of 4.4. percent at the end of the year.”
Is that what the 2 year note, which the FED follows, is projecting? “Follow the Yellow Brick Road. We’re off to see the wizard, the wonderful Wizard of Oz.” Sing along if you know the words.
GBP Car registration (MoM) Aug -42.7%
Italian Car registration (MoM) Aug -44.6%
German Car Registration (MoM) Aug -17.2%
French Car registration (MoM) Aug – 31.8%
Looks like that China economic falloff is affecting consumer spending in export reliant Europe.
Why is Fed all of a sudden cutting rate to spur consumption in US?
Between commercial real estate in trouble domestically and Europe appears going in tank.
bmcc post has a point
The countries you list are all also in a demographic death spiral. Perhaps car registrations are down because young people don’t exist to buy them in the first place.
https://www.ft.com/content/7a558711-c1b8-4a41-8e72-8470cbd117e5
“Falling birth rates and an ageing population mean more people will die than are born annually by 2025, marking a long-term reversal of a historic trend, projections released on Wednesday by the Office for National Statistics showed.”
we will be in a demographic death spiral if not for our southern border being wide open for the past 400 years. don’t let the MAGALOIDS round up millions of young breeders and chase them away. they have MAGALOID SYNDROME. pity their idiocracy. they are a cry for help………..like special olympic kids…….
How about making more babies via the traditional way?
Nothing like a growing family to spur demand.
Speaking as a Magaloid here.
Oh and 58% of Teamsters would agree with my post.
teamsters are one step away from red diaper babies. unions are the entry drug to commie stuff
Teamsters have lost the ability to drive horse drawn wagons.
MR. MAGALOID, i’ve fornicated and have added to society by breeding a few of my own, and in this idiocracy i took 2 children in………….whose idiot boomer parents were too consumed with their own narcissism and nihilism………….is this the first cult you have joined, or have you been one of the manson family acid head chics, or maybe a moonie ? please LOL, it is just for fun. i have magaloid friends and neighbors. i approach them with slow movements and like to pet them. like a petting zoo lamb.
Teamsters support for Trump brings with it some serious voting block alignment. At 58% for rank and file along with family members it’s over for Harris and Timmy.
By the way I started out as a donkey NUG (new useless guy) carrying lumber and hand nailing (there was no such thing as air nailers when I started) for first two years in residential Housing.
A person had to learn to walk at heights without all the safety equipment mandated today. Carry 10 studs on shoulder as that was normal expectations. Worked the bench and then carry it all up to deck area or Roof. Sheathed whole houses by myself with Ladders.
Fascia work, interior trim, flooring, poured concrete, drove skid steer loaders, backhoes, payloaders, owned and operated Hi Lift equipment.
So I learned how to work by working with old school master Carpenters. If a person were to piss one of them off enough they’d just throw a hammer at you.
The stuff I have done most of the big talkers would stain their panties. So am not very impressed by all the toughies out there, having seen it all before.
dumpy is still a moron. so you worked hard in life. great. good for you. grab a ticket and wait your turn. ain’t anything special in the history of humans.
Even Democrat run NYC is being dragged under by the illegal immigrant crisis. It was rich Democrats that didn’t want even a small group in Martha’s Vineyard.
They deported them to somewhere else in the country.
very true…….but it’s all by design. we elect idiots because we are an empire of idiots.
The last thing any country needs is pond scum, as Europe has finally discovered–now paying its immigrants to LEAVE.
Your fundamental assumption is all growth is good. It is not. What is needed is a socio-economic model for post-industrial society. It would begin with reduced welfare, which rewards not working.
we should have stopped the immigration with who and what year. 1492? perhaps keep out all the scotch irish and germans for sure. hell no to the pond scum catholics and so forth. and hell no, to the jews and muslims.
I posted month over month which show severe contraction on a short term basis.
Contrast that with
YoY
GBP -1.3%
Italy -13.4%
Germany -27.8%
France -24.3%
It is all conjecture as to the why part for Fed 50 basis but a collapse in Europe’s consumer and Bank stress consequence is reasonable.
Fed based upon most US data even this mornings just hitting the wires existing home sales, is tepid at worst but not crash position type data.
Fed claims they are domestic oriented but being as they get their marching orders from BIS and are a critical part of the globalist bank cartel, does anyone believe they are solely USA centric.
They bailed out the world during GFC is that now only in the past and not in present.
Will be remaining short EURO/USD which is having directional moves on hourly, so something is likely brewing.
If Fed is looking for US consumer to pick up the slack in Global demand when most are maxed out on credit, well that is not very pretty.
HERE IS THE REAL REASON WHY FED IS MOVING FAST WITH OUR ECONOMY FINE. IMHO. Since the Fed’s explanation for lowering rates doesn’t make sense in a U.S. domestic context, I suspect they are lowering rates for other reasons – perhaps trying to keep Japan, Europe or China from imploding.
Then I’m reminded of the 1927 decision to needlessly lower rates here to aid France.
The inevitable collapse of the ensuing credit bubble was the proximate cause of the Great Depression 1929-1930s. depression is now being exported out of china…………that’s the real fear. deflation with our mountain of debt at gov and company and private level in everything…………would make 2008 look like a picnic.
stocks are roaring globally after the fed cut. IWM up another 2% this am, good times are here again….the money train has left the station yet again, hope everyone was on it. …..$…….$
In this, you are correct–partially. The Fed will likely bail out foreign banks as it has done in the past. You get to pay for it, btw. An alternate explanation is the Fed has lost control. It throws a 0.5% party, and gets 0.1% attendance.
The solution, though is not higher taxes. It is making government effective.
Why do Fed employees get 40 days vacation per year after 2-3 years of service? Why is the competence level mediocre, and the public ‘servant’ salaries higher than the private sector? Why are most Fed employees liberal?… And outrageous retirement benefits, given how little govt employees actually worked.
@bmcc – I posted nearly all of your comment yesterday. I appreciate your support for my idea, but you’d look smarter if you wrapped it in quotes and gave proper attribution!
Bonus: Mish provides us with helpful comment-specific links, so you can show exactly where my comment came from in the prior thread:
https://mishtalk.com/economics/rate-cut-cycle-begins-fed-cuts-its-key-interest-rate-by-a-half-point/#comment-285947
Pump it up until you can feel it.
Pump it up when you don’t really need it.
Since the preceding article, we have two new pieces of information to slot in to our evolving picture of the economic and financial future.
The first is that, well before 2050, what we think of as “modernity” will have come to an end.
The second is that governments are going to try to counter this process by driving public debt up to stratospheric levels.
This raises a string of important questions. First, where is all of this additional government debt supposed to come from? Second, will this enormous appetite for public borrowing squeeze out private access to credit? Third, what effect will all of this have on inflation?
A picture may be worth a thousand words, but only two emerge from the graphs in Fig. 1.
The first is “QE”, implying that central banks will have to finance an increasing proportion of government largesse with newly-created (“printed”) money. To paraphrase Milton Freidman, ‘excess money creation is always and everywhere inflationary’.
The second word is “crash”. Anticipating what kind of crash, and when, requires a shift of focus from the purely monetary to the material.
https://surplusenergyeconomics.wordpress.com/2024/09/17/289-project-2050-part-one/
when empires run their courses over the last half century of life….. there is usually a currency debasement or outright theft of treasury……..the thieves at MIC and wall street(they are government sponsored entities with free currency via discount window and much more………..) seem to be already fulfilling the path of past empires like USSR and UK and Spain………
The same trend of human nature applies to the decline and fall of all empires.
anthropology 101. yes
An (A)political Fed. Spoos futures ramp about 100 pts overnight. Markets sold off after the Jerry show, because 50 bps in the end seems like panic. Either recession, or stagflation. The jump to hyperspace starts around 2am, i.e. in Europe. The place where Ukraine war is. UKR, Trump impeachment over a phone call about Biden’s corruption. Where long range strikes against Moscow are being approved, war was ramped up in 2014 against Russian speaking, Moscow friendly provinces leading to Crimea and current carnage. So who ramped markets overnight? Astute investors or bleep bloop algos running all the stops because they know where the stops are? Who runs those algos? Oh yes, free market, lol. Eventually the shenanigans may fail. Maybe.
Do you think this is bullish for stocks?
QE next shoe to drop.
US dollar depreciates versus euro, yen, sterling, Swiss franc.
Commodities inflate.
US unemployment rises.
Loan defaults increase.
US M2 shrinks.
The result in stages per above: Stagflation rises followed by deflation.
Would you loan the Feds money for twenty or more years? That’s why as the Fed cuts, long term rates rise. You have to stop the spousal unit (Congress), from buying everything he/she wants.
Exactly, a 0% FED Funds rate and a 10+% 10 year US treasury yield.
It’s coming. Not short term, but end of 2025 into 2026? Highly probable.
Just as Medicare, Medicaid, and Social Security knowingly fail.
Who would want a 2% 10 year US treasury bond? Nobody.
YCC manipulation a certainty short term, but fundamentals will win out.
The truth is the Fed didn’t hike soon enough in 2022, after cutting too much in 2020 and and hiked too much by 2023. 4-4.25% FFR seems to be a reasonable balance between economic growth and savings. The only way to kill the housing bubble is through confiscation of properties that were purchased for the purpose of money laundering. IMO, this was probably 20-30% of all purchases in the US after Covid.
If stocks are trading at grotesque valuations, and a euphoric AI bubble persists, and people are willing to pay top dollar for homes and pay 62K for bags of digital air, then why the need to cut rates???? Where is the “restriction”?
bubble of everything is gonna catch the chinese deflationary depression……….flu. why the fed is panicking
Mish, any thoughts on the whipsaw action in gold today?
Quite the turnaround and my simpleton brain doesn’t understand why.
Somewhat consistent with the price action across all risk assets. Seemed to be a universal reaction – burst of optimism/risk-on behavior followed by some reconsideration.
By the end of this year, there will be a few hundred more billionaires.
Yellen used to call it the ‘dot plot chot’ cause she had that New Yawk accent.
LOL!!!
Growing up in California, a first or second grade substitute teacher from NY (Mrs. Sciappa) came to our school. During her spoken spelling tests, the sentence was (inexplicably) “The boy lost his parts”. Needless to say the entire class wrote POTS. It aggravated everyone, including her, a fair bit (nobody found it as funny as a room full of adults would have) and it persists as a traumatic memory from grade school lol.
There it is! So .5 + .25 + .25 = 1.0BP!!!
The current pattern is nearly identical to the late 70s inflation waves. If the pattern holds, everyone will be in happy land for the next 12 to 18 months as the Fed cuts then inflation will spike into the late 20’s (’27,’28,’29) right as 80m people will be on SS getting $150b/month in handouts, a sick and depleted labor force, and a whole lot of medicare spend.
No one here can say they weren’t warned or saw it coming. The worst hit will be seniors and fixed income folks. The least impacted will be the well prepared investor.
Mish, you recently listed a number of factors (deficits, demographics, etc.) which supports MPO’s reflationist post. Unfortunately, I cannot dig it out. Can you direct me to that post as I would like to share it with others? thanks!
Heading on the road.
It may have been this one
https://mishtalk.com/economics/elizabeth-warren-asks-the-fed-for-a-three-quarter-point-interest-rate-cut/
Problem is that real interest rates are still pretty high. Risks remain more downside than upside. A 50 bps cut could have some inflationary impacts due to the messaging, but overall it’s still contractionary given 1.9-2.7% expectations of inflation (the range per inflation-indexed swaps and U.of M. survey)
4.875% mid on funds less 2.70 is still over 200 bps for a real short term rate. 300 bps if you use swaps as the bogey (I wouldn’t, but some do. There’s a liquidity/hedging bias there.)
That’s pretty high. 50-75 is neutral.
Come on, Genius: many seniors have Fixed Income (short, Intermediate, and Long) in their portfolio’s because they have enough Excess Cash and generate PLENTY of money to cover Expenses.
Many seniors no longer travel. I have no fewer than five Octo’s in my Family and none of them fly, most of them order delivery food and live in huge houses too big to make sense but they remain anyway as they NEED no stock returns.
One of the original SIX just died (MOM) with MILLIONS sitting there and we had no idea and her cost of living was down to $4K a month, enough to live until she was 120 years old. Grand kids are inheriting it. THEY will deploy those funds into stocks, etc. I TEACH them how and where in their charts they should buy, hold, sell or ignore. There are THOUSANDS of stocks to choose from.
Yes. You must nurture the gene pool all the way to the end of the universe. Stick to the plan.
I don’t know what you mean by “many seniors” but you should know by now to tangle with me on anything data driven.
https://money.com/average-401k-balance-by-generation-2024/
Here are the median 401k balances for each generation.
$242k is not ‘plenty’ to live off of unless you’re eating ramen noodles every day and live in a tent.
It’s clear you’ve come from a privileged and pampered part of the boomer generation so congrats on your wealth but it’s not the same for most seniors.
> My Thoughts:
- Here are the median 401k balances for each generation.
> Minus any taxes of course.
– Boomers (born between 1946 and 1964): $242,200
> lived in a very prosperous time, where if you didn’t do anything wild, crazy or overly special, you could still do enough to have a nice life lined up for yourself. Got lots of stuff, worth lots of money, if for time and upkeep if nothing else. A very good time, to have lived conservatively, frugal, and learned a bit about finances, but no gamble stuff. You certainly did “Reap What You Sow” in this Generation!!
– Gen Xers (born between 1965 and 1980): $182,100
> Boomer homes, cars, camps, investments etc. fell positively into many hands of this generation, and many to follow perhaps?
– Millennials (born between 1981 and 1996): $62,000
> Got the scraps leftover from the Boomer money, but many sort of maybe were living with an expectation of a larger windfall perhaps?
– Gen Zers (born between 1997 and 2012): $12,000
> The live for today crowd, for a host of reasons. Most of the Boomer money was gone or was/is tied up perhaps?
– $242k is not ‘plenty’ to live off of unless you’re eating ramen noodles every day and live in a tent.
> Medical Bills alone, will rip through that in 5-10 years, after a bad fall, respiratory issues, the need for special equipment, Insurance, etc.
Thanks for posting the figures above. Helpful in trying to see where things may be headed.
401k balances are just part of the picture.
I don’t have a 401k. Yet, I own three houses and have 600k in assets. I’m 46, so quadruple the average.
If you measured my wealth by my 401k, I’m worth nothing.
Fair, it’s just 401k balances, people own homes and other assets which can be liquidated to pay for things but like David, you are an exception not the rule. And you’re going to have huge tax problems when you retire based on that matrix of assets you have. good luck getting it sorted out.
Also keep in mind that it’s the median which means half the population have balances way below that number and the other few have the majority based on the Pareto principle (80% of wealth controlled by 20% of the people).
So in that context, the problem is really far worse than the median numbers display.
– 401k balances are just part of the picture. > An extremely small part and perhaps nothing at all, depending where, why, and what exactly you invested in. I started in 401K’s when they first were a thing. You couldn’t help but crush it then, and especially with a very good Financial Advisor. Money just gushed into the coffers back then… My how times have changed!
– I don’t have a 401k. Yet, I own three houses and have 600k in assets.
> The flip side of the coin. I have several friends that went the house flip route. They all did extremely well, as we sat a couple decades ago. Not so much a sure thing now, and you must have money to lose & Invest at the same time, from my experience in discussions with them. There portfolios sit nicely now, with a steady stream of rental income, but housing has taken on a different vibe now days imo.
– I’m 46, so quadruple the average.
> Good for You! Nicely done, and it’s always great to see and hear about success stories. They are getting harder to find now days. Keep up the good fight!!
– If you measured my wealth by my 401k, I’m worth nothing.
> So are a lot of folks WITH 401K’s that have tanked and are worth close to nothing, I equally hear horror stories of portfolios vanishing rather quickly, with just a few bad decisions. I highly recommend getting professionals involved, if you can get a hold of a trusting one with a good track record, which also can be hard to find…
I agree with most of that but with does cheaper and alternative energy mitigate some of the price pressures?
All one has to do is superimpose a 3 month T-bill chart over the Fed Funds rate to discover the Fed follows the 3-month T-bill rate, they do NOT lead it. Why there’s such a widespread belief the Fed “controls” interest rates is mystifying.
What matters is how long term bonds respond to short term policy. Short term policy is not for two or three trading days but the cycle will be ongoing for at least a year at turning points.
Long term interest rates are not doing what Fed would want if they wanted lower rates to finance longer term economic activity. Bonds are acting as if this were inflationary in outcome, which is counterproductive to where Fed presumably believes policy should go.
I don’t disagree but I think the bigger issue is the huge public and private debt overhang. US debt is competitive because there’s high confidence invested principal will be returned, but that doesn’t mean that if liquidity begins to dry up the US won’t have to pay competitive rates to fund the massive (and expanding) Federal debt.
Yep not a good look for Fed to ease just because everyone else does it.
It’s not mystifying after you look one level deeper. The short end of the bond market anticipates the Fed, which communicates its reaction function fairly well.
If the Fed followed the market, you’d have seen the Fed lower rates a lot sooner. The market has been crying wolf about “fed cuts ahead”, and has been wrong, for nearly 2 years up until now.
This sort of behavior by what is publicly known to be a partisan Fed (WSJ article on the political makeup of the Fed) makes it such that Congress has an obligation on behalf of all Americans to audit the Fed. Fed abandons inflation fight to protect jobs with U3 at 4.2% and relatively healthy Job Quits? I’m sorry but that doesn’t cut it. Mish you do great work but you can’t really argue that this wasn’t politically motivated. That means the Fed is de facto a partisan entity. The only explanation other than this is that the Fed desperately needs yet more inflation and is hell bent on providing it through yet another bubble and is only paying lip service to fighting inflation. This implies an inflation target rate over 3%, not 2. There is a rather large difference between 2% and 3% inflation. Fixed income participants should now be divesting of everything longer than 3 years. Lord help us all.
It isn’t partisan. They would have taken any other candidate than Trump. Project 2025 wants to neuter the Fed and sell all assets except treasuries. While it is a good goal, Powell knows they can’t deal with the uncertainty of a 2nd Trump admin.
Such BS. Monetary policy acts with a 6-9 month lag. If the Fed wanted to help the economy before the election, it needed to act 6-9 months ago. F*cking idiot.
It’s sh*t like yours that makes me glad I mostly ignore politics. It f*cks with your brain.
REMEMBER when LBJ literally beat up the FED chair in his living room on his ranch to lower rates invoking red blooded american boys dying in indochina? politics is business is war. and vice versa 3 times
Assuming that the Fed’s economics AND politics are directed at the US populace even in partisan fashion. Which it appears like they are. What if they are directed at US “interests”, meaning global expansion which includes the current UKR war, Gaza, military alliance with Europe via Nato, China, Iran blah blah etc. Americans as subjects to the empire, nothing more.
correcto el mundo fonzie
The first move in the market response is the false move … Todd Harrison, many moons ago. Rates falling means cats and dogs are back on the menu.