The Fed won’t but slashing/pausing rate hikes anytime soon…

by OptionsKing–CFTC

To be perfectly clear, there is no possible means of stimulating the economy right now.

If we experienced another COVID-19 pandemic, 9/11, 2008 financial crisis, rates will likely continue to go upnot downThe fed knows that they cannot stimulate the economy without making inflation worse which is the last thing you basically want to do during a crisis.

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  • As far as the banks go, pausing rates would be just as much of a disaster as slashing them. You’d essentially be telling the American people that the bank’s overleveraged problem’s (for being too risky) is more important than the purchasing power of the tax paying citizen–it’s not. Pausing rates aren’t guaranteed to do anything either because a lag exists. At the very most, some banks may have more room for liquidity however, in a scenario like this, the fed would lose it’s grip on inflation which would eventually prolong rate hikes making problems for the banks even worse.
  • Slashing rates for the banks would trigger a massive demand for cash–hence it’s purpose in stimulating the economy. However, in this case, since inflation is still relatively high and inflation is the result of too much supply of cash, institutions–who have access to tons of debt very quick–would pull as much as they can and use it before it devalues. Demand would be out the roof the moment this happens because institutions know that it’s value would become less right away as supply balloons. By the time your average tax payer can borrow cash, bread will cost $25,000.

So do yourself a favor, forget about rates being cut or paused anytime soon. It’s not happening for at least another year or two.

TLDR:

Rate hikes aren’t going to pause or be slashed for a long time, even if we have some kind of disaster. Fed can’t stimulate the economy without making inflation worse.

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