The Federal Reserve cut interest rates by a quarter point and suggested only two more reductions next year. Markets fell as Jerome H. Powell, the Fed chair, said the latest cut was a “closer call” than before, as inflation lingers.
This appears to show a stabilizing fed funds rate which is a far cry from the last 3 cycles when the Fed suddenly dropped from the peak to an ultra-low (negative real) rate.
The “neutral” rate seems to be higher than many economists expected. The markets that have relied on free money will have to adapt to a more stable real yield that approximates the pre-2000 norm – around 2.5% over inflation.
This has really knocked down foreign currencies, and many have farther to fall. The Euro, in particular, will be under pressure as the ECB will need to lower rates much more given the low growth in Europe. At, or barely above inflation would be reasonable.
The risk is that cheap European goods will incur a tariff, not because they are subsidized, but simply because European elites made some snooty comment about our next leader.
While not putting specific numbers to any country other than China, Mexico, and Canada, TFG has promised tariffs of 10-20% on everything imported from everywhere. On his last go around, he seemed to have a particular burr in his kazoo about Mercedes. He must have had one at one time, that was a lemon.
I wonder if he ever had a car? It’s quite possible that he was driven by drivers in various cars for hire (either owned externally or owned by him, but still not a “personal” car) his entire life.
