As the Fed begins purchasing $60 billion of T-bills per month, the composition of its portfolio will change.... Read More
The Fed's balance sheet has expanded by almost $200 billion due to its repo operations, but this is still a drop in the bucket compared to the combined assets of the biggest central banks.... Read More
The fed funds futures market is being distorted by problems in the repo market. In turn, this means the implied odds of any future rate cuts are also being distorted.... Read More
The median FOMC forecast is for rates to hold steady at the final two meetings of the year. Be careful making too much of the market's implied odds of cuts due to the stress in the repo market.... Read More
Over the last few days, the bond market has traded as though the ECB hiked rates. In light of the new tiering system, this is actually true. The effective ECB deposit rate went from -0.40% to -0.27%.... Read More
Central bankers talk about the limits of monetary policy, but the ECB has not acted in a way that indicates their effectiveness is in question. Instead of acting again tomorrow, they should recognize their limits and not move.... Read More
Today the Wall Street Journal posted a story indicating the Fed will likely only cut rates by 25 basis points at the September meeting. This is not enough to un-invert the curve and will likely disappoint the markets.... Read More
Lagarde's defense of negative rates suggests they are sticking around for a while.... Read More
The fed funds rate remains the highest interest rate in the developed world and the only one above 2%. The Taylor Rule suggests this should not necessarily be the case.... Read More
Jim discussed his case for cutting rates 50 basis points.... Read More
The markets are pricing in a much more aggressive rate cutting campaign than the Fed has hinted at so far. Powell has a chance to address this difference of opinion at his Jackson Hole speech tomorrow.... Read More
No Feed official is scheduled to speak until Powell opens the Jackson Hole conference on August 22. His remarks will be closely followed as a sign of future policy.... Read More
Eric Rosengren and Esther George recently offered their arguments for holding rates steady. We see larger risks in a slow rate cut campaign than in a fast rate cut campaign.... Read More
Jim was on the TD Ameritrade network talking about the Fed.... Read More
As the Fed prepares to cut rates for the first time since 2008, attention will turn to forward guidance. More cuts are expected later this year.... Read More
We believe the real fear in the halls of the Fed is not that Trump moves to take over the Fed. Rather, the fear might be that Trump moves to take more control over the Fed and the markets rally in approval.... Read More
Yesterday, CNBC's Steve Liesman relayed some interesting concerns from inside the walls of the Federal Reserve.... Read More
The Fed has not clearly articulated a reason for cutting rates. They now seem to be focusing on weak global growth, something that rarely topped their discussions. Powell needs to explain why they are cutting rates Wednesday, otherwise the conclusion is the markets are driving Fed policy.... Read More
The Fed is preparing to cut rates. Since they have not articulated a reason, it seems that the inverted curve and market pricing are driving this decision. If the inverted curve is weighing into the decision, the Fed should continue cutting until the yield curve really steepens. In the past, that has taken several rate cuts, often by more than 100 basis points.... Read More
The Fed has now made it clear they are cutting 25 basis points next week. While we have our reasons for favoring rate cuts, we have not heard a good argument articulated by the Fed. Is data dependency dead?... Read More