Fed Slashes Rates By 50bps
September 18th, 2024Via: ZeroHedge:
The economy is so great, it needs an crisis-level rate cut 2 months before the election.
cryptogon.com
news – analysis – conspiracies
Via: ZeroHedge:
The economy is so great, it needs an crisis-level rate cut 2 months before the election.
https://www.ft.com/content/724347b0-918a-4c7a-8e5c-946eb27f19a5
This is behind a paywall, so here’s a recap : high net immigration served to ease labor shortages, helping to bring inflation to a more desirable level. Now that job creations are slowing down, still strong migration may push the Fed to lower interest rates.
/
I would suggest that optimal employment maximizes surplus value, so the Fed does not set the level of economic activity. However interest rate interventions impact bond yields, inventivizing switches in modes of saving. Capital income rate equalization proceeds through modified risk as the ratio of bond interest mass to potential stock dividend mass changes. Else inflation annihilates any immediate effect.
The phenomenon is quite observable in corporate bond issuance data, rising when the Fed raises rates yet stronger inflation is not expected & unemployment won’t tick up (2006 is a good example).
Small businesses don’t rely on bonds that much for financing (although this seems to be evolving), so they’re likely to be more sensitive to monetary policies. Not that large firms won’t use the profitably available manpower.
As to mortgages and consumer credit – sometimes imagined as the real way through which monetary intervention operates -, in order for them to single-handedly impact overall consumption (including homes) they would have to override the causal link between standard-of-living and (once again) the maximizing of surplus value, which is about balancing incentives to work and strike risks.