Nice work, Claudia. I found this snippet especially compelling coming from someone who understands the mindset within the Fed....:”The Fed is determined not to be head-faked again. It won’t cut until it’s confident about the lower inflation. That level of confidence is unlikely this year. If a recession comes or the market slides further, don’t expect the Fed to come to the rescue”. This seems entirely plausible, although it’s not what our financial markets are expecting.

Expand full comment

The funds rate has already been above the 10-year bond yield for a while, even before an expected hike.

Such inversion has never been sustained for long without recession.

And we have never had recessions without deep and long rate cuts.

In Feb 2008, the FOMC finally cut the funds rate to 3% - ending the inversion, then steepening the curve.

There would not have been a "great" recession and might have been a soft landing had they done that six or seven months sooner.


Expand full comment