Rates and possible plans

2023年12月19日

Rate cuts:

The Federal Reserve declared rate cuts to be a little bit ahead and it’s an attempt to rein in the exuberance that has driven up stocks and bonds.
Loretta Mester challenged expectations that the central bank would abruptly pivot towards lowering borrowing costs now it was more confident it had lifted its benchmark interest rate to a level restrictive enough to bring inflation under control.
Her comments align with two other members of the voting 2024 FOMC members, John Williams and Raphael Bostic which agree that rate cuts were not imminent.
Mester said the next phase is not when to reduce rates, even though that’s where the markets are at and that its about how long do we need monetary policy to remain restrictive in order to be assured that inflation is on that sustainable and timely path back to 2 per cent.
She also added that the markets are a bit ahead and that the jumped to the end part which is where the were going to normalize quickly and we don’t see that happening.
Since the central banks final meeting of 2023, traders in the future markets have stepped up bets that rate-setters will lower their benchmark interest rates as early as March and reduce it over next year to just below 4 percent from its 22 year high of 5.25 to 5.5 per cent.
The catalyst for the last FOMC meeting was a dovish message from Fed chair Jay Powell, who struck a confident tone about the banks grip on inflation conceded that a nascent debate was under way among officials about rate cuts.
Austan Goolsbee said he was confused about the markets response to the last weeks Fed meeting. He also stated that the Fed chairs remarks was wishful thinking and that there is what they hear and what they want to hear.
The new projections also out last week showed most policymakers backed lowering the federal funds rate by 0.75 percentage points in 2024 and another full percentage point in 2025 before it falls under 3 percent the year after. (3 year plan, 24, 25, 26).
Mester is retiring in June (attention to her actions) said she was among officials to forecast three quarter-point rate cuts next year given her view that inflation would continue to moderate as growth cooled further and unemployment rose slightly, which should be called soft landing. This is harder to achieve but it’s the option they want to choose.
With this settings the Feds policy is in a good place but officials would not wait long to lower rates so that they did not cause excessive job losses.
They were saying that they were not going to content with inflation settling on a level above their goal and that they were not going to ignore the maximum employment part of the mandate and that balancing those risks are going to be important and change with how the economy is going.
If the Fed slow inflation means we are in inflation and its decreasing so we will be searching for buys in gold on major events or on the ones based on the topics mentioned above.
We might have sell opportunities but will be shorter than the buys and I will search for them on Thursdays and Fridays.
I will be tracking buys since deflation is going to happen but slowly cause of the soft landing.