Inflation

[divs4ever]

"If we have to raise rates more than expected, we will".

Markets PLUMMETED in response. +1.1 to -1.17 on the NDX and still dropping.

Edit: Close 1.6 into the red. Lol.

so what did the bond prices do ??

remember both the Treasury and distressed banks need to SELL bonds .. but who is buying ??

plummeting bond prices ( or no buyers at all ) means the Fed has to QE 'or else ' ( the merry-go-round stops )

some banks will hold bullion but i doubt selling that will fill the hole

 

[divs4ever]

2024. Definition of recession is two quarters of contraction so the contraction would have to start within the next 3 months and that seems... Unlikely.

using which calculation of GDP ?? ( because they are changing that as well )

for instance in the US the major growth industry seems to be petty crime ( and i assume home/car /business repairs after those theft events )

 

[JohnDe]

Food for thought -

Central banks face an excruciating trade-off

Just now they have to choose between financial instability and high inflation. It wasn’t meant to be that way

The job of Central bankers is to keep banks stable and inflation low. Today they face an enormous battle on both fronts. The inflation monster is still untamed, and the financial system looks precarious.

Stubbornly high inflation led the Federal Reserve to increase interest rates by a quarter of a percentage point on March 22nd, less than a week after the European Central Bank raised rates, too. The Fed acted days after three mid-sized American banks had collapsed and Credit Suisse, a grand old Swiss bank with more than SFr500bn ($545bn) in assets, suffered a wounding run that ended in a shotgun wedding with its rival, ubs. Bankers led by Jamie Dimon, the boss of JPMorgan Chase, are trying to shore up First Republic, the next teetering domino.

The trouble is that central bankers’ two goals look increasingly contradictory. All but the biggest American banks are suffering from the consequences of higher interest rates. Dearer money has reduced the value of their securities portfolios and has made it likelier that depositors will flee to big banks, or to money-market funds. Cutting interest rates would help the banks; so does backstopping the financial system. But either option would stimulate the economy and make inflation worse.

It was not meant to be like this. New rules introduced after the financial crisis of 2007-09 were intended to stop bank failures from threatening the economy and the financial system. That, in turn, was supposed to leave monetary policy free to focus on growth and inflation. But the plan has not worked, obliging central banks to perform an excruciating balancing act.

Consider the humbling of Credit Suisse. Regulators are supposed to be able to “resolve” a failing bank in an orderly fashion over a weekend by following a plan to wipe out shareholders and write down convertible bonds (or convert them to equity). But Credit Suisse’s demise has sowed uncertainty and confusion. Instead of winding down the bank, Swiss officials pressed UBSto buy it, providing generous taxpayer-backed loans and guarantees to make the deal work and even passing a law to make the terms watertight.

Although regulators wrote off the bank’s convertible bonds, shareholders still received $3bn, upending the expected preference of bondholders over stockholders. Officials say this inversion was allowed by the bond contracts’ small print. Even though regulators in Britain and the eu were quick to insist that they would respect the usual order of creditors, the Swiss departure from the norm has inevitably shaken investors’ faith, creating doubt about what might happen with the next bank failure.

America’s improvised rescue of all the depositors of Silicon Valley Bank and Signature Bank could also have a corrosive effect. Deposits above a cap of $250,000 per customer are not formally insured by the federal government. But nobody is sure which larger depositors would be bailed out if a bank failed. Jerome Powell, the chairman of the Fed, said on March 22nd that depositors “should assume” they are safe. The same day Janet Yellen, the treasury secretary, said expanding insurance to all depositors is not under consideration. Meanwhile, the Fed has lent $165bn through its newly generous lending schemes, which shield banks from the risks of holding long-dated securities.

As we were about to publish this, it looked as if First Republic would survive without more state intervention. Nonetheless, the combination of banks’ travails and regulatory uncertainty could yet harm the economy.

One source of pain could be America’s small and mid-sized banks. Banks with less than $250bn in assets account for about half of banking assets and 80% of loans for commercial property, a sector that has been vulnerable since the pandemic. If smaller banks continue to lose deposits or if they need to raise capital because investors or regulators doubt their safety, then they could limit the loans they make, slowing economic growth and inflation.

Another cause for concern is credit markets. The extra yields paid by the riskiest firms to borrow have risen and in some markets credit seems to be drying up. Worries about tighter financial conditions have led markets to pare back their bets on high inflation even as they have priced in interest-rate cuts.

As they weigh this precarious economic outlook, central banks must also be cautious about the signals they send. Because they regulate banks, they have special insight into the health of the financial sector. One reason the Fed was right to raise rates this week was that a sharp U-turn would have caused panic about what the central bank knew that markets didn’t.

Where to go from here? The essential aim is to fix the regulatory regime, so that central banks remain free to fight inflation. A big task is to revisit the measures that ensure one bank failure does not spill over into the next. If needs be, policymakers must be able to recapitalise a failing bank by writing down bonds or converting them to equity. And it should be clear that shares will first be written off entirely.

In America the appeal of insuring all depositors is that they would then have no incentive to flee from smaller banks. But the real problem is lax capital rules for banks with less than $700bn in assets and inadequate planning for the failures of banks with under $250bn. Offering universal deposit insurance without fixing those problems would encourage excessive risk-taking. Banks would remain fragile yet be freed from any scrutiny by large depositors.

Don’t look down​

Until the banks are fixed, monetary policymakers have no choice but to take into account the dangers they pose to the economy. The Fed must scrutinise the lending behaviour of affected banks and build it into its economic forecasts, and also keep a close eye on credit markets. It would be a mistake to stop fighting inflation to preserve banks. But inflation also needs to be brought down in a controlled manner, and not as a result of the chaos of a financial crisis and the economic agonies it would bring. Central bankers already faced a narrow path to success. The ravines on either side of it have become deeper.

 

[rcw1]

Good morning

Citi chief economist, Josh Williamson sees Australian inflation remaining "stickier for longer", with a year-end inflation forecast of 5.4 per cent versus a consensus of 3.5 per cent.

"Our reasoning is based on the fact that food and services inflation will persist in 2023, while goods deflation may not be as acute because of still-elevated costs for businesses," Mr Williamson says.

He further states that while goods deflation could accelerate on the back of softening demand, strong underlying household demand for services, a tight labour market, and a pick-up in wages growth points to ongoing services inflation in 2023.
Williamson also sees housing as a catalyst for stronger prices.
Rental inflation is set to accelerate double digits on the back of record-low rental vacancy rate and a deceleration in the housing stock. Meanwhile, construction costs remain elevated although they have declined from high levels. A large pipeline for residential
construction still implies that owner-occupier dwelling costs will increase in 2023.

A tight labour market and ongoing wage growth is expected to cause services inflation.
He sees this being exacerbated by food inflation lifting restaurant and takeaway meals.

Have a very nice day, today.

Kind regards
rcw1

 

[over9k]

So exactly what I've been saying for months. Gotcha.

 

[mullokintyre]

One interesting point from the Zero Hedge,

The Fed removed inflation "has eased somewhat" and just left "remains elevated"

So given the Feds insistence that inflation will be brought down irrespective of other conditions, one might ask if perhaps the perceptions of easing are a little premature?
The following graph of inflation might suggest that inflation has definitely fallen from its June 2022 peak.
However, the pace of inflation slowdown has eased a lot, and it might take until the middle of next year to get the figures down to 2%
Will be most interesing to see the figures from March and April CPI.


Mick

 

[qldfrog]

Not necessarily. They're hoping that the events of the past few weeks will continue and lead to private credit contraction. Unfortunately they can't quantify it in terms of interest rate hikes.

They've also left themselves open to future rate hikes and they're planning to keep rates elevated for the entirety of 2023. **** even the 2024 projections are high.

4 or 5% is not high, it is on par with inflation rate for centuries, nowhere near enough in my opinion to sponge the last decades of excess.
Time will tell but they have to Reset the system via new currency and or drastic horrendous economic depressions..the WEF Reset in a nutshell

 

[divs4ever]

4 or 5% is not high, it is on par with inflation rate for centuries,

true , but we are also in an era of unprecedented ( well quite a few folks are ) debt levels , and i believe that is the issue , it isn't just a few hedge funds and stockbrokers this time ( or even a handful of property moguls )

 

[waterbottle]

4 or 5% is not high, it is on par with inflation rate for centuries, nowhere near enough in my opinion to sponge the last decades of excess.
Time will tell but they have to Reset the system via new currency and or drastic horrendous economic depressions..the WEF Reset in a nutshell

I dunnooooo, 5% is pretty high (I'm assuming you're talking about interest rates) given we've had ZIRP and low interest rates for the past few years.
Also the fact that we're seeing banks starting to blow up.
JPowells commentary RE: SVB bank was that it was an outlier, but they couldn't have been the only institution buying short term bonds when they'd had shitty yields for the past few years...

I think they're on the right path. They know that the system is starting to stumble and that further tightening will lead to more "explosions". They've admitted to it without saying so by skirting around the issue.

I don't know enough about a global Reset and implementing a new currency. But I do know that for something to displace the USD as reserve would probably involve a whole bunch of work by bureaucrats that'll only happen once there's a literal apocalypse. Might be interesting to read what happened with the last Reset (shift from Gold standard)?

 

[qldfrog]

true , but we are also in an era of unprecedented ( well quite a few folks are ) debt levels , and i believe that is the issue , it isn't just a few hedge funds and stockbrokers this time ( or even a handful of property moguls )

so hyperinflation AND collapse..or freeze market freedom with a war, Russia..already on but hey can nuke still, China, UFOs, antivax..easy as we have seen to manipulate the sheeple

 

[divs4ever]

so hyperinflation AND collapse..or freeze market freedom with a war, Russia..already on but hey can nuke still, China, UFOs, antivax..easy as we have seen to manipulate the sheeple

pick your favourite name , but i see pension funds crushed ( unless they freeze withdrawals/draw-downs ) from what i have read hyper-inflation is bad enough add to that many are already maxxed-out on their credit limits ( normies , banks and businesses )

looks like ugly times ahead

 

[JohnDe]

 

[divs4ever]

View attachment 154887

yeah ! great story ... until you realize the Fed share-holders are a consortium of large banks ( including having directors , that are bank executives themselves )

the guy in the suit is normally the hedge-fund analyst or retail investor

 

[over9k]

BOE raises another 25, exactly as expected.

 

[over9k]

Aka "we're going to raise more".

 

[over9k]

Jobless claims at 191k vs 197k estimated. Plenty left in the tank. Rates to rise further. Good.

 

[moXJO]

View attachment 154891

Aka "we're going to raise more".

The Fact there was no pause after the banking fiasco seems to indicate they want to crash land this sucker.

 

[moXJO]

Is there any signs of additional weaponised inflation from China/Russia supply lines?

 

[over9k]

The Fact there was no pause after the banking fiasco seems to indicate they want to crash land this sucker.

Watching the interview, the bank stuff caused a 25 rather than a 50. So an effect yes, but that's all.

Something tells me a lot of people are working behind the scenes to make sure that the banks can take more rises.

 

[over9k]

Is there any signs of additional weaponised inflation from China/Russia supply lines?

Russia's going after ukraine's grain export infrastructure now, so yes.