The Fed’s Wrench (and how it’s going to change everything).
Rates matter--perhaps more than anything else in capital markets...
Andrew Duehren and Yuka Hayashi writing for WSJ: High Inflation Darkens Global Economic Outlook
“The worst is yet to come,” said International Monetary Fund Managing Director Kristalina Georgieva at a Thursday briefing, as finance officials gathered in Washington for meetings hosted by the IMF and the World Bank. “Across many economies, recession risks are rising.”
The current (short term) economic focus misses the bigger threat over the long term; namely the more than $300 trillion of debt and $2 quadrillion of derivatives that WILL ALL BE REPRICED - quickly!
Rates matter, perhaps more than anything else in capital markets
The Fed's actions have already caused ripple effects across the pond in the UK. Emerging market currencies are already feeling it and Europe is not far behind.
"...will be the Fed reaction in the coming months because the strength of the dollar keeps the pressure on our currencies,” Barnabás Virág, deputy governor of Hungary’s central bank, said Monday at an event sponsored by the Institute of International Finance."
We may be approaching a time when more people recognize the error in giving the Fed a dual mandate.
Said differently, the robotic process they must follow, forces them to keep raising rates until they see a red flag from labor. The problem with this approach is the labor market won't show any red flags anytime soon (especially considering how they calculate the labor force #s).
Let's save that topic for another time - sounds too laborious for now 😜
In the meantime, here's more evidence from the horse's mouth.
Notice the two bullet points under the Bloomberg headline?
Fed Can't Pause Rate Hikes With Core Inflation Accelerating: