The Fed won’t taper until 2023 at the earliest. DXY down. Silver up $0.80. Gold up $17.50…

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Seems like they don’t want the crash to happen until the next president.

But that hasn’t been the case of late, with the 10-year yield BX:TMUBMUSD10Y slipping around 15 basis points from its late March high. That is not all — the U.S. dollar DXY, -0.12% has softened, and the trading in eurodollar EDZ24, -0.01% futures suggests reduced expectations for the number of interest-rate hikes between now and the end of 2024. “That all kind of makes sense with a slower growth trajectory beyond this year,” says Joe Lavorgna, the chief economist of the Americas for Natixis Corporate and Investment Banking.

Also see: Dollar bears cheer as rate-sensitive traders track Fed expectations

This year will see “gangbusters growth,” says Lavorgna, the chief economist for the White House National Economic Council in the latter days of the Trump administration. “If the economy was healthy before the [COVID-19] pandemic began, it would make sense the economy would come back quite quickly, and that’s certainly been the case in the U.S.” But Lavorgna distinguishes between gross domestic product growth and the U.S. jobs picture, which is still over 8 million jobs short of pre-pandemic levels.

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And this job outlook is dependent on the small-business side, where the data haven’t been great. “If we significantly lift marginal tax rates, and the tax rates on capital, that’s going to really hurt the S corps,” he says, referring to businesses with no more than 100 shareholders. The White House didn’t reply to a question about S corporation tax policy.

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Lavorgna isn’t fearful of goods and services inflation, and, as a result, says the Fed won’t begin to taper its bond purchases before 2023 — and won’t lift interest rates before the next presidential election. The New York Federal Reserve’s survey of primary dealers, in March, found Wall Street expecting that the taper would begin in the first quarter of 2022, with the first hike in the third quarter of 2023. “If you’re going into 2022, and growth is a lot slower, the delta is negative, and inflation isn’t really picking up, it’s going to be very hard for the Fed to taper,” the Wall Street veteran says.


h/t McDonald Trunalimunumaprzure


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