The Fed’s Wrench (and how it’s going to change everything).

Rates matter--perhaps more than anything else in capital markets...

The Fed’s Wrench (and how it’s going to change everything).
Not sure if any of the geniuses at the Fed could do it, but imagine them throwing this 🔧 at EVERY BUSINESS's growth plans 😱

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:

SOURCE: Bloomberg (Notice👆the 2 bullet points?) #DualMandate