Although the president of the FED, Jerome Powell, adhered to the established policy of the “slower economic growth with a higher expected inflation” yesterday in his testimony of the congress, there is no doubt that the feeling is changing within the Federal Reserve for a easier monetary policy in the coming months.
While Barr and Bowman appointed by President Trump have begun to be more vowels about the need for the Fed to decrease, what convinced me was Austen Goolsbee, the comments of the president of the Federal Reserve of Chicago as of Monday, June 23, where he pointed out that until now, the wave of rates has had a more modern impact on the economy relative to what was expected. The exact appointment was “something surprising, so far the impact of tariffs has not been what people feared.”
I thought it was unusual for Austan to be so direct, for what was clearly a “easier monetary policy” comment.
Austan Goolsbee was appointed by President Obama to be the president of the Council of Economic Advisors during the presidential mandate of President Obama; Therefore, this opinion is likely not to have partisan feeling.
Inflation graphics
Click on the previous reporting page and take into account the inflation table of the main services in the lower left corner of the page.
The inflation of the services has been a problem since 2022 – 2023 when in general it reached its maximum point in the area of ​​9%, and the inflation of the services is much slower to withdraw at 2% – 3% than the inflation of goods in recent years.
However, the services and inflation of the shelter have finally begun to cooperate with the restrictive monetary policy of the Fed.
Conclusion:
Last year, Jay Powell and the FOMC reduced the FED funds three times, at 50 PB of the week of September 20, 2024, for 25 BPS the week of November 8, 2024, and in another 25 BPS the week of December 20, 2024.
At that time, Jay Powell and the FOMC pointed out (I thought) that the FED fund rate in 5,375% was excessively restrictive in terms of monetary policy, and (I thought again) suggested that at 4,375% where it is currently located, it was still restrictive.
Today is traded with a 3.80%yield, while the FED fund rate is still stuck at 4,375%, which suggests that Fed / FOMC is right about the impact of monetary policy.
When Tesoro Bisunt’s secretary was playing Good Cop with the BAD Cop of the President at the beginning of April 25, he said specifically to pay attention to: My impression was that the Trump administration wanted the lower crude (mid -$ 50) to give its inflation and the implications of purchasing power of consumers, but would allow the lowest rates of lower rates mainly to begin a lower interest expense in the debt of interest in the low That is now the single line of a single line, the lowest line, the rates of the fees of the Fed.
With hysteria around tariffs and Israel, Iran, and the rest of the noise of the media, the overview remains the record budget deficit (since it is in the background as the 800 -pound gorilla in the corner of the cage), which must finally be treated. Moderate Republicans supposedly left yesterday and said they were going back to Medicaid cuts. That is not great news for deficit reducers.
There is still the probability that the Budget Law does not decrease the budget deficit, and that is the short and long term problem now.
That may be the reason why investors are more optimistic at the short end of the treasure yield curve than the long end of the curve.
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Discharge of responsibility: None of this is advice or recommendation, but only an opinion. The past performance is not a guarantee of future results.
Thanks for reading.
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