That is where we are. And that is where the Fed always has been ever since Volcker.
Five Things to Expect in May
- A quarter-point hike
- A second dissent
- Powell will announce the QT initial schedule by running down the balance sheet, not outright selling
- QT will not even start immediately. It's more likely Powell will want to telegraph the start to not upset the market. So look for QT to start in June, with a natural runoff.
- Powell will promise to get tough if necessary
There are three camps on what the Fed does. I respect everyone below.
Many and Faster Hikes
- Jim Bianco
- Macro Alf
Serious QT to Steepen the Curve
- Harvey Bassman
- Joseph Wang
- Lacy Hunt (Spoke with him Friday)
- Steph Pomboy
Other than Hunt, I compiled those groups from statements or videos posted on Twitter.
If I have anyone wrong, I will be happy to switch groups or create another.
There is room for a middle ground that no one seems to have taken. That would be something like a moderate amount of QT coupled with a moderate amount of hikes, say 4 hikes plus a fair amount of QT, starting slowly.
There is also room for a superman group: 6 or more hikes plus a heavy amount of QT.
In May we will see how serious the Fed is.
The more serious the Fed is, the more likely a recession starts this year, not next.
For more on why I think the Fed won't get serious, please see Existing Home Sales Dive 7.2 Percent Wiping Out January's Big Month
This post originated at MishTalk.Com.
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