Fed Williams's speech this morning dramatically changed the outlook for the December 10 FOMC meeting.
As highlighted by Jim Bianco, the current tally looks like this: * 5 Voters have strongly signaled they do not want to cut rates next month (Barr, Musalem, Schmid, Goolsbee, Collins) * 5 Voters signaled they want to cut rates (Miran, Waller, Bowman, Williams, Cook) * 2 Voters are unknown (Powell and Jefferson) If the Fed is truly becoming independent, then it should be a 7-5 vote ... either way. Time will tell...
Reaction to the release of the FOMC minutes: the probability of a rate cut is down to less than 30%...
➡️ Many participants stated that it would be appropriate to hold interest rates steady for the rest of the year, in line with their expectations. 📌 Most participants supported the October rate cut, while some said they would not support any changes. 📌Almost all participants stated that ending the balance sheet reduction program on December 1st would be appropriate. 📌Many participants said a December cut would be appropriate. 📌Many participants noted the possibility of a disorderly decline in stock prices, particularly if expectations regarding artificial intelligence were suddenly reassessed. 📌Most participants preferred the Fed's portfolio to match the composition of its outstanding Treasury bonds. 📌Some participants preferred a larger proportion of Treasury bonds, stating that it provided more flexibility. 📌Many participants believed the December rate cut was inappropriate. The Fed's economic outlook, released at its October meeting, suggests that real GDP growth through 2028 will be slightly stronger than the September forecast Source: Bianco Research, @EcoPulseStreet
Reserves are in deep "scarce" territory with reverses zero.
But reserves would go back to "ample" once $300BN in Treasury cash is drained in a few days. Source: zerohedge
Very interesting to see money supply expanding this aggressively even as global central bank balance sheets have been contracting.
What will happen once central banks inevitably need to expand their balance sheets again? Source: Tavi Costa, Bloomberg
WALLER: Supports a December cut...citing "a weak labor market and mon pol that is hurting low and middle-income consumers."
Waller has been a Fed leader and, whether his view of a Dec cut prevails, the Fed will eventually be forced to respond to the lower-K. Source: 3fourteenresearch
According to Jim Bianco, significant change is now underway at the Fed.
Last week, the probability of a Fed rate cut at the December 10th meeting went from 70% on Monday to 42% on Friday. However: - There were no major government data releases, as the Government was still closed until Wednesday - The Federal Reserve chairman did not speak this past week. So what drove this shift in the outlook for policy? Here's an explanation by Jim Bianco: * 4 Fed voters are arguing for another rate cut (with Miran arguing for at least a 50 bps cut). * 5 voters are arguing for holding rates steady * 3 voters are either neutral or unclear (so far) on how they will vote. This includes Chair Powell. For 40 years, Fed policy was effectively set by one person, the chair. The monetary policy vote was typically 12-0 or 11-1. The Fed justified this unified front by saying it reduced market uncertainty, thereby making it more effective. Now this is changing, and so is the market’s view of the Fed. With higher-than-normal uncertainty, the market is pricing a 50/50 chance of a cut. Normally, these odds are much closer to 0% or 100% when a meeting is less than a month away. What Changed? We would argue Trump’s constant bashing of the Fed/Powell and Fed Governor Miran’s vocal arguments for a 50 bps cut appear to be breaking the 40-year stranglehold the Fed chair has had over committee voting. No longer are the 12 FOMC voters going to fall in line with the chair’s desires. They are quickly considering themselves truly independent voters and will vote as they see fit. Maybe Fed Governor Stephen Miran is leading the way. If he can ignore the Fed groupthink and act completely independently, publish blog posts explaining his rationale, and do numerous interviews to explain his opinion, then why can’t everyone else? The result is 12 truly independent voters. This is how every other major central bank and the Supreme Court operate. If this is truly happening, it marks the end of the Fed’s unanimous voting.
Odds of a rate cut at Fed December meeting have increased again (70%+) but Fed officials remain divided on three questions that come down to judgment calls:
1. Will tariff-driven cost increases truly be a one-off? 2. Does weak hiring reflect a demand slump or reduced supply? 3. Are rates still restrictive?
BREAKING: U.S. Banks
FED just did it again! Another $24 Billion injection into the U.S. Banking system Make that $125 Billion over the last 5 days Source: zerohedge
