So the Fed has almost completely capitulated...
They've reversed their balance sheet from attempting to offload assets to accumulating more assets (and remember, these are probably primarily bad assets, or under-priced securities that the banks are exchanging with the Fed for cash at full market value -- thus the Fed is at the losing end if these deals).
Thus, they're obviously injecting printed cash back into the financial system, so far to the tune of about $400 bill since March 6th.
The only thing missing is lowering the Fed funds rate, which is currently at 4.75-5.00%. Keep in mind, US inflation is still 6%. The reason that's notable is because the Fed funds rate is theoretically supposed to exceed the inflation rate to make a lasting difference. Yet we're still about 1.00 bps under inflation with signs of a potential pivot (cut in rates) in the near future.
In the meantime, panic in the banking sector is still ongoing, with banking known unkowns in the not too distance future.
Not only have we probably not seen the full manifestation of higher interest rates yet and its full effects in the system, but I personally believe we have yet to see the full manifestation of the inflation that was created years ago and its full effects. We'll see.
They've reversed their balance sheet from attempting to offload assets to accumulating more assets (and remember, these are probably primarily bad assets, or under-priced securities that the banks are exchanging with the Fed for cash at full market value -- thus the Fed is at the losing end if these deals).
Thus, they're obviously injecting printed cash back into the financial system, so far to the tune of about $400 bill since March 6th.
The only thing missing is lowering the Fed funds rate, which is currently at 4.75-5.00%. Keep in mind, US inflation is still 6%. The reason that's notable is because the Fed funds rate is theoretically supposed to exceed the inflation rate to make a lasting difference. Yet we're still about 1.00 bps under inflation with signs of a potential pivot (cut in rates) in the near future.
In the meantime, panic in the banking sector is still ongoing, with banking known unkowns in the not too distance future.
Not only have we probably not seen the full manifestation of higher interest rates yet and its full effects in the system, but I personally believe we have yet to see the full manifestation of the inflation that was created years ago and its full effects. We'll see.
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