The Financial Times notes the Odds of Fed Rate Cut in 2019 Jump as Growth Outlook Dims.
January 3, 2019 vs December 3, 2018
The above chart is from CME Fedwatch with my anecdotes in blue.
Mike “Mish” Shedlock
Rate Cut Odds Soar on Weak Data
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The Fed will continue to unwind its QE balance sheet even if they stop hiking rates. The next test for Powell is if he gives in. My guess is he wont but he will be out voted to keep rates where they are. He will then move on for someone who is in favor of rate cuts at all costs. The economy will explode then implode in this scenario. If we want a currency that has some value Powell is our best hope.
I think that as long as the unemployment rate remains low, the fed will hike. For those who want a job at prevailing wages, most everyone has one. Incremental hires will be the very young, those marginally attached to employment, and those who have been out of work for awhile. These are all low-productivity individuals, which means added costs and lower profits for employers. Continuing along in this environment may lead to real inflation. The one thing the Fed cares about.
They arent low productivity. They are just older and cost more in health care costs. Unemployment above 50 is still in double digits for a reason. It isnt because they magically became unproductive. In fact the employed older workers have the know how of an older quarterback in the NFL.
Productivity is output over cost. With virtually unlimited, and ever rising, risk of a shakedown by the ambulance and -chaser communities by hiring anyone too old to still be on their parents’ health plan, hiring older quarterbacks just aren’t worth the risk in any field less remunerative than the NFL.
If there are any “deals to made” with Trump and the Fed.
Rate cuts beginning about 9 months before the 2020 election.
Too soon now…