0:00
Now listen here carefully. Jerome Powell
0:03
is making a speech right now. That
0:05
speech is going to be coming out in 1
0:06
hour and 4 minutes and the market is
0:10
already pricing in a 90% probability of
0:12
a rate cut. However, that is not
0:15
actually the case. We're only giving a
0:19
Why is this a problem? Because this is
0:22
essentially showing that the markets are
0:24
trying to price in something that is not
0:25
necessarily real. The market is
0:28
essentially trying to price in a rate
0:30
cut when the Federal Reserve is not
0:32
necessarily communicating that at all.
0:34
How the latest CPI numbers look really
0:36
good. This is of course a deflationary
0:38
print here. That is not going to be
0:40
enough for the Federal Reserve to be
0:42
cutting rates. Of course, they need to
0:44
see a real substantial drop in the core
0:46
CPI number here to be able to justify a
0:48
rate cut. So far, they're not seeing
0:51
that. And remember guys, the Fed always
0:54
acts behind the curve. takes them time
0:56
to react to the latest changes in the
0:58
market. In fact, it always takes them
1:00
six to 12 months to react to the latest
1:03
change in the economy. We're right now
1:05
in month 16 of their hiking cycle. Month
1:08
17, month 18 is coming up. So, we are
1:12
indeed getting close to the end of the
1:14
hiking cycle, but it is not over yet.
1:16
The terminal rate is still 5.6%. The
1:19
latest dot plot is still showing 5.6%.
1:23
And until we see a substantial drop in
1:25
the core CPI number and until we see
1:28
that inflation is actually dropping and
1:30
not just this CPI number, but also some
1:34
of the other inflation gauges as well,
1:36
we're not going to be seeing a rate cut.
1:38
Now, this is of course getting extremely
1:41
hard for Jerome Powell to not be
1:42
announcing a rate cut. Of course, the
1:45
housing market is crashing and of course
1:47
the banking crisis has not ended yet.
1:49
We're still seeing banks collapsing out
1:51
there. And of course, the regional banks
1:53
are still lending way less. So, they're
1:56
going to be applying a break on the
1:58
economy, but it's a break that's going
2:00
to be implemented with a delay. It takes
2:02
time for the effects of the Fed's
2:04
monetary policy to propagate through the
2:05
economy. So, we going to be seeing the
2:08
effects of this monetary policy
2:10
tightening that we've seen during the
2:11
last year and a half. We're going to be
2:13
seeing it now. And I do believe we're
2:16
going to see the economy weaken, the
2:18
growth to slow down, and that might
2:19
force the Fed to actually lower rates.
2:22
So, right now, the market is pricing in
2:24
a 90 chance of a rate cut in September.
2:27
However, I do think that that is too
2:29
aggressive of a move. The Fed needs to
2:31
see inflation drop. They're not seeing
2:33
it yet. Of course, the latest CPI
2:35
numbers look great. They need to see the
2:37
trend lower and sustain in the core CPI
2:39
number and some of the other inflation
2:41
gauges as well. We're going to be
2:43
hearing from Jerome Powell in 1 hour and
2:46
4 minutes. Let's see if there's any
2:48
change in his tune. There's anything new
2:50
that he wants to announce. So far, he's
2:52
been saying that inflation is too high.
2:54
And he needs to see evidence that
2:56
inflation is sustainably moving lower
2:58
before considering a pause or a cut.
3:01
Have they seen any of that evidence? I
3:03
don't know, but we're going to be
3:04
finding out in 1 hour and 4 minutes. So,
3:07
make sure to leave your notifications on
3:10
and of course check out the updates that
3:12
I'm going to be posting throughout the
3:14
day and evening. Make sure to join our
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