As the FT reported in yesterday's Federal Reserve decision on interest rates in the USA:
The Fed held interest rates at a 22-year high, but the decision came alongside new forecasts from central bank officials pointing to 75 basis points worth of cuts next year — a more dovish outlook for rates than in previous projections.
75 basis points is 0.75% in lay terms. That would mean that US rates would fall to a range between 4.5% and 4.75% next year.
That is better news than there being no planned rate cuts.
But as we also know, US inflation is now heading for target rates, and is only just over 3% now. Despite that, the oppressive interest rates are going to be maintained.
It still looks as if the world's central banks are desperate for a recession and are going to hold out until they get one.
Expect much the same from the Bank of England when they make their decision on rates. Limping us lamely to economic catastrophe is their style, after all.
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Markets are pricing cuts in – they read the writing on the wall. Given the time lags involved in the transmission of interest rate policy to the actual inflation rate it is not clear that the last hikes were wrong – even on their own terms.
Agreed
But the cuts need to be bigger than markets are pricing, in my opinion
Fed “dot plot” suggests they think rates will be 0.5% to 0.75% lower in a year from now. SOFR futures for the same period says rates will be 1.25% lower (and a further 0.75% lower at the end of 2025).
Now, we know that the level of rates is completely in the gift of the Fed so market pricing reflects where the market thinks the Fed will get to – it probably thinks (if markets think) rates should be even lower but the pricing reflects where the Fed will be dragged (kicking and screaming) to.
Noted
Core inflation in the USA remained at 4% in the stats published earlier this week.
The chances of inflation undershooting target in the USA are very slim in the next 12 months, but if you’d like to bet on your view, there’s someone at the IEA who would gladly make a wager with you.
Actually, it is 3.1%
Bit since when did a troll worry about facts?
https://www.theguardian.com/business/live/2023/dec/12/uk-wage-growth-slows-jobs-market-us-inflation-interest-rates-business-live
What is important here is that the central banks are using a very blunt instrument that is causing collateral trauma – interest rates.
It’s like trying to make a delicate clinical incision using a cross cut wood saw.
This points to not only a lack of proper tools to deal with inflation, but also a lack imagination.
So its not just the way they do it, but the lack of thinking behind that worries me. In fact, lets call it ‘unthinking’ because that’s what it is – inveterate, chronic.
It maybe that they do not want recession even though that is what this is going to cause. The inflation rate is everything it seems and wider metrics will only come into play once they have met their goal – twisted as it is.
“The world’s central banks are desperate for” …..Trump and other extremists to get into power………”and are going to hold out until they get one” (or a bunch)
The fantasy economics of assorted central banks will have one unwelcome outcome – more nutters will get elected into power.
The problem is that the central banks either don’t care or don’t understand that this is an outcome of their “fight inflation at all costs via interest rates” policy.
Actions (or inactions) have consequences. But the ruling meme of “central bank independence” means that anything they do has no consequences…….. for them.
“It still looks as if the world’s central banks are desperate for a recession and are going to hold out until they get one”
Net Zero means permanent recession, no?..The economy cannot grow while it’s being shrunk.
Explain to me why doing more for each other means the economy will shrink.
Because ‘doing more for each other’ is not reflected in GDP.
I wondered where the services sector went in national income accounting
Now I know – it is ignored
Amazing insight on your part
Trolling is such an unattractive pastime
Oh do come on Mel!!
Why do you think many are advocating investing in Green, whilst rolling back carbon?
Answer: So that there is still growth in the economy.
The threat of recession is not from Green expansion.
It is from carbon producers funding political parties that hold back or delay the green transition that we need. This and only this – creates the scenario you complain about above and it is a totally artificial situation created by the short-termism and greed of the carbon lobby.
Does that help?
Now, either please wake up or go back to sleep. It’s your choice.
Well said
Without fossil fuels we will be able to travel and produce a fraction of what we do now.. unless of course science produces a miracle in battery technology to allow energy storage in scale for a decent tenure. This of course is overlooked by the green bandwagon or assumed as likely by the non scientific types. Trust me this is not happening in the lifetime of those posting on here. So net zero and economic growth can not be achieved in unison. But if it makes some feel “content “ or more “purposeful” in their campaigning then let the nativity take over.
It’s very odd that only tiolls think as you do
Seerious scientists – the ones who are driving the demands for change faster than governemnts want to deliver – do not.
Can you explain that?
Speaking as an engineer – there is little problem doing 100% de-carb of local elec consumption. I have a project running which does that (and offers elec @ half the price of that from elec retailers) . & produces green H2 for… transport. Ulemco (Liverpool company) converts diesels to burn H2. So conversion of the existing transport fleet is possible. If green H2 for transport is not taxed – it is easily cost competitive with diesel or petrol. There you go – no subsidies and we have a zero carbon economy – & you go further for the same money.
With zero carbon elec and green H2 we will be better off than we are now.
None ofthe above is a “point of view” – just realities – backed by numbers.
Thanks