Ritholtz advice to the Fed

Declare victory and start lowering rates.


3.4% is not victory. 2% will be victory. And they might declare it as we enter the 2s in a meaningful way. If perhaps we hit 2.7 or 2.8%, with a downwards trajectory, they would do one or two cuts.

Besides, they already announced that they are slowing QT beginning in June which is a kind of rate cut in itself.


I’m sure that Fed Chair Jerome Powell will change his announced plan because of nagging from investors talking their book.
Right? :wink:



On the other hand, 2024 is a kind of tightrope for the fed because it’s an election year. If someone’s preferred candidate is behind in the polls, and they do a rate cut in September, then many who support the other candidate will scream “election interference”, and the fed really wants to avoid that kind of stuff. That is why I think that if the numbers appear to be doing well in June and July, there is a strong possibility of the first rate cut at the end of July. Otherwise, the first rate cut will be in November or December or even next year.

Meanwhile fed funds rate futures show less than a 30% chance cut in July. We shall see.


I thought investors wanted high interest rates so they could get paid well for loaning money with low risk.

That is the contradiction. The borrowers do not want high interest rates, but the lenders DO. With “helicopter money”, they took as much as they could get–even going with low-yield projects. Banks are both borrowers AND lenders, so they want to PAY LOW and LEND HIGH. Hence their push of long-term CDs offering very low interest interest to the customers with significant deposits. They are trying to lock-in a low interest BORROWING COST, which the banks will immediately lend as HIGH INTEREST LOANS (bank income).

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