OSU Beavers
Elite Member
- Joined
- Jan 10, 2007
- Professional Status
- Licensed Appraiser
- State
- Oregon
Have you heard of the credible threat theory?He's going to have to force the Fed to cut rates
Bingo. The Fed still holds the credible threat - and intends to try and keep employment as high as possible but dampen down inflation and so far it's more a whack-a-mole situation. Tamp one down and another pops up. The question is how long companies will hang onto employees while hoping for a cut in the rate and reducing their costs. As 1st quarter ends next month, but mid-April we may see a lot of employee lay-offs and those almost always result in people getting behind on car and house payments. If you are a bank who loaned $10,000 over MSRP on a new truck in 2022, the buyer hasn't had enough time to even pay that surplus price, let alone pay down the principal to the current value of a 2-year-old vehicle competing with trucks now available at or below MSRP. There may end up being a slew of 2-3 year-old trucks that are repos and the banks get to take a bath on...which means the bank is getting more and more likely to be charged with "failing to perform 'safe and sound' banking" and then the FDIC steps in...or, infused with Fed cash in the case of TBTF banks.Core PCE is at a 4.8% run rate, wouldn't expect any rate cuts any time soon.
And WTI crude oil just topped $80 for the first time in months...Virtually all the oil indexes are over $80 and you only have to check gasoline prices. Last week, I saw the first $3 gas in a long time. Today, virtually every gas station is no less that $3.09.The Fed's Cleveland Nowcast has Core CPI at 4% for the first quarter of 2024, which includes the prediction for March. If you look at the squiggly lines, inflation isn't going down because of high interest rates. No interest rate cuts for you!
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