“Higher for Longer” Rates Have Risks – Especially for Banks

As expected, at its recently concluded March meeting, the Fed stood pat on interest rates. Of greater interest, the “dot-plot,” a picture of FOMC thinking about rates over the next two years, stayed at three cuts for 2024. Looking at the chart (the 2024 column), the median dot is 4.625%. That is a 75 basis […]

Policy Lags are Real – Inflation’s Days are Numbered

There are several measures of the money supply, the most looked at being M2 (cash + demand deposits + time deposits + retail money market funds). That official series goes back to 1959, although estimates are going back even further. But just looking at this 64-year history, we find that the two growth rate extremes […]

More Proof: Deflation Is The Future

Consumer Prices The Consumer Price Index (CPI) rose +0.4% in April (4.95% Y/Y). Core services (ex-housing), an important sub-index for the Fed, came in a little hot at +0.4% M/M (vs. +0.3% in March). In our view, this alone isn’t likely to cause the Fed to raise the Fed Funds rate yet again when it […]

The Seeds of Deflation – Sewn by the Fed

Despite the many announced layoffs these past few months, the unemployment rate decreased to 3.4%. That’s tied for the lowest level since 1953. Of course, the politicians will take heaps of credit, but the fact is that it fell, not because of job growth, but because people left the labor force, which is really not […]

March Inflation: In Like a Lion; Out Like a Lamb

The CPI came out on Wednesday – it only rose +0.1% in March – that’s down from +0.4% in February and +0.5% in January. On a Y/Y basis, it fell from +6.0% in February and +6.4% in January to +5.0% (see table). CPI actually rose only +0.053% to the 3rd decimal (about half as much […]

Deflation is the Future

Most of the panic from the mid-March bank runs seems to have dissipated. But, we caution, most of the real fallout lies ahead as banks move into restructuring mode, which will only serve to deepen the Recession. There are still some “Nervous Nellies” on the Street when it comes to the Regional Banks. On Wednesday, […]