The Caution Light is Lit

December 03, 2023

by Karl Denninger Market-Ticker.org

The last few days have been interesting.

Powell allegedly was expected to make people believe “rate cuts” are coming. Indeed, some of the callers on the various media channels are now claiming six rate cuts will come next year.

I’ll take the under on that: No they won’t because the only way that can happen is if Congress balances the budget, which it has shown zero inclination to do.

I don’t expect there will be any “rate cuts” next year; if anything short rates are going higher, not lower. Why? Because until Congress cuts it out the only other alternative is that the roughly 8% inflation created by Congressional deficit spending, none of which has any source of absorption anymore outside the country (the slacking of trade growth and US/EU sanctions imposition due to the Ukraine mess destroyed that and it isn’t coming back) is going to show up in inflation and that means real rates are still negative.