The CNBC interview with Atlanta Fed President Raphael Bostic was perhaps the most clear and concise summary of the Fed viewpoint I have seen up to now.
TLDR:
- He thinks we will see a slowdown but avoid recession
- He thinks it wont be necessary to cut rates until mid next year
- They are stubbornly chasing the 2% target instead of accepting something rangebound between 2-4% (unrealistic?)
Notably he is not the only one of the Fed members who have started repeating the narrative that they plan to cut rates on the short end and that 5.25+ becomes too restrictive in real terms as headline inflation trends lower.
This interview has to be taken in context of the recent move up in long term rates and the flattening of the yield curve. I only hope they will cut sooner rather than later. We have a magical opportunity for US10Y to hang out at 5% and then cutting short rates to un-invert the yield curve before a recession hits and possibly getting that soft landing they are trying so hard for.
I am doubtful the Fed could be that nimble, though. Thoughts?
TLDR:
- He thinks we will see a slowdown but avoid recession
- He thinks it wont be necessary to cut rates until mid next year
- They are stubbornly chasing the 2% target instead of accepting something rangebound between 2-4% (unrealistic?)
Notably he is not the only one of the Fed members who have started repeating the narrative that they plan to cut rates on the short end and that 5.25+ becomes too restrictive in real terms as headline inflation trends lower.
This interview has to be taken in context of the recent move up in long term rates and the flattening of the yield curve. I only hope they will cut sooner rather than later. We have a magical opportunity for US10Y to hang out at 5% and then cutting short rates to un-invert the yield curve before a recession hits and possibly getting that soft landing they are trying so hard for.
I am doubtful the Fed could be that nimble, though. Thoughts?