I think the the Fed says "damn the torpedoes" and hikes 25bps next week. Down from the 50bps they would have hiked otherwise. But they're still going to hike. I'm taking in the under on people predicting they go full QE. Save this note.
Discussion
It’ll start with incognito QE - but don’t be mistaken. Guaranteeing loans for bonds at expiration value no matter when their date is essentially turns all bonds into cash. Not good!
Definitely, even with a 5 handle cpi, which I think we’re getting after what Biden said last week.
BTFP allows them to protect national interests (e.g. domestic banks) while sucking cash away from the developing world. Just like Mr. Gladstein has been writing about. So Mike you’re right & this sucks.
Makes sense. Confirming the pivot by a cut would just escalate the chaos.
With the new backstop vehicle in place, the destabilization risks from hiking marginally more are lower than from any other move.
They’ve got a rate problem that turns into a credit contraction (banks response to losses) that turns into an NPL problem, that further contracts rates. This all occurred because of the speed they raised rates, most banks didn’t have time to readjust. Why would they raise rates n make their problem worse? FDIC would have to cover more losses. They could cut rates and solve their problem.