Since the Fed’s decision to lower rates six months ago, much has changed.
When we look back at September, everything was different.
- The jobless rate had risen to 4.2% and was now deemed weak. Sahm’s rule was invoked and there were fears of a possible recession.
- The Fed could also begin to reduce the federal funds rate to support the labor market, despite the fact that inflation was still close to its 2% goal.
In order to achieve this, the Fed has cut 100 basis points in those years up to today.
In these months it is easy to get complacent and think that our cycle has slowed down. Now it’s time to enjoy the wave.
However, if we return to today, it is clear that the world has changed. All things considered, the cycle of cutting is now over.
Look at the employment market. It has significantly improved. When we compare the current unemployment rate with the Fed’s December forecast, it is clear that the number has dropped significantly.
There is absolutely no reason for the Fed to ease its stance at the moment, especially if you are looking at the side of dual mandate that deals with employment.
So, any marginal easing by the Fed will fall under the dual mandate’s inflation component.
We received this week the CPI for January. It was hot by all reports.
The Core CPI was 0.4%. This is a significant increase from the recent figures.
Inflation has been a story of goods deflating, while services have remained stubbornly high. The chart shows that the main issue is today’s inflation of goods and the refusal by services to disinflation. 
Simple takeaway: Inflation is still above the Fed target of 2% and fluctuating around 3-4 %. This is why the Fed has little incentive to lower rates as long as it continues this trend.
With all of this in mind, the cycle for rate cuts is now over. Currently, market expectations have shifted from expecting to see a rate decrease in March this year towards the end of the current calendar year.
It’s reasonable that the Fed will keep pushing these reductions until the cuts are no longer needed.
Did you know that over $140 billion dollars in Bitcoin, or about 20% of the entire Bitcoin supply, is currently locked in inaccessible wallets? Or maybe you have lost access to your Bitcoin wallet? Don’t let those funds remain out of reach! AI Seed Phrase Finder is here to help you regain access effortlessly. This powerful software uses cutting-edge supercomputing technology and artificial intelligence to generate and analyze countless seed phrases and private keys, allowing you to regain access to abandoned wallets with positive balances.
