Rate cuts aren’t just about inflation as you point out. The mounting deficit and impending debt spiral are the reasons necessitating rate cuts. The dollar system and its keeper (USG) are losing credibility and trust with so much debt piling up. Everyone can see they’re violently insolvent and they’re losing global trust faster than ever before imo.
I think the Fed officially moves the goal post on inflation (3% = fine) and cuts rates in 2024 at some point.
That’s what I expect too.
Powell obviously sees that he’s accelerating the debt crisis. Maybe he was hoping that the politicians would find some fiscal restraint and slow down their deficit spending. (Never gonna happen)
Powell probably also realized by now that his high rates are actually accelerating inflation by increasing demand from the liquidity provided by the growing interest payments while shrinking the private sector supply of products.
He was probably looking for some way of saving face. I’ve been thinking he’s been hoping for CPI to touch 2.9% so he can say it’s at 2% to start lowering rates.
Yeah they need to just change the CPI formula again, problem solved. Lol. They’re screwed no matter what.
A complicated system dependent on trust and centralized levers will always be on a journey to zero imo. The only unknowns are how fast it gets there and what mistakes will be made along the way.
