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Here’s What The Fed Will Say Today And How To Decide If It’s Hawkish Or Dovish

Here’s What The Fed Will Say Today And How To Decide If It’s Hawkish Or Dovish

We already did not one but two lengthy FOMC preview (the first…



Here's What The Fed Will Say Today And How To Decide If It's Hawkish Or Dovish

We already did not one but two lengthy FOMC preview (the first one is what the Fed will do, the second one is why what the Fed will do may be even more hawkish than most expect), so we won't waste readers time with even more analysis of what the market expects things to get - below we show the latest rate hike odds chart indicating 100%+ odds of a 50bps raise (2 rate hikes) today, as well as the next three consecutive Fed meetings (in May, June, July and September) including almost 50% odds of a 75 bps rate hike in June - which eventually rise to more than ten 25bps rate hikes through December 2022...

... and instead we will simply publish Goldman's proposed redline statement of what the Fed will do today (there is much more in the full Goldman preview note available to professional subscribers).

For those who missed our preview, today the Fed will announce a 50bps hike (JPM sees a 1 in 5 chance of a 75bps hike) and the start of QT. The parameters were largely announced in the March minutes so the main event will be Powell’s stance in the presser. For this I look to the quote below at the IMF panel for his most current thinking: they are not waiting to see the peak in inflation to move expeditiously to neutral. This notion has been repeated by almost every Fed speaker to indicate the path between now and year-end

Of course, much of today's Fed communication will come from Powell during the FOMC presser where a hawkish surprise may be more likely to emerge, so pay attention there whether the Fed will hike 50 or 75bps in coming months, and also for some additional clarity on the Fed's balance sheet reduction plans.  As a reminder, the Fed will announced QT which will begin in June and take 3 months to ramp up to the $95bn/month cap, comprised of $60bn for Treasuries and $35bn for MBS. As discussed last night, the most relevant part of the meeting will be the language for forward guidance and whether that gives any hints as to a 75bps hike or changes to QT cadence.

In their preview of the FOMC, JPM's rates traders have a neutral stance heading into the Fed as "the Rates market is pricing in 200bps of hikes over the next 4 Fed meetings and valuations are looking cheap." With markets pricing in neutral rates policy, investors are increasingly looking at the short-end of the yield curve to find value. The erosion of risk premia in the yield curve likely  means that the most dramatic moves in bonds this year are now behind us. For Equity investors, a reduction in bond vol could mean seeing the VIX reprice lower, too.

Finally, speaking of JPM's flow desk, here is their summary of potential outcomes:



  • Change in statement to highlight return to neutral: “continue to expeditiously remove accommodation.”
  • Usefulness of 75bps noted vis-à-vis the 1994 experience (see Bullard below)
  • Powell quotes a neutral rate or range of neutral rate that is at or higher than the 2.375% in the presser
  • QT implementation note to include language on sales as in the balance sheet normalization plans (“In the longer run, the Committee intends to hold primarily Treasury securities in the SOMA”) or the March FOMC minutes (“after balance sheet runoff was well under way, it will be appropriate to consider sales of agency MBS to enable suitable progress toward a longer-run SOMA portfolio composed primarily of Federal Open Market Committee Treasury securities.”)
  • QT implementation note or press conference supports the idea that any reinvestments above the cap could move to front-end USTs only (a change to the current proportional add-on process)
  • QT May start and caps less than 3Ms
  • Anything that indicates QT could be used to more specifically target inflation


  • No change to statement: “anticipates that ongoing increases in the target range will be appropriate.”
  • Use of expeditiously in the presser to describe pace to neutral
  • Borrows language from Williams and Brainard to be vague about the actual level of neutral
  • QT June start, 60bn UST/35bn MBS phase in period of 3months
  • QT implementation mimics 2017 and purely focuses on logistics
  • A focus on “deliberate/consistent/methodical” policy action as base case when asked about 75bps but not entirely dismissive (see Mester below)


  • No change to statement: “anticipates that ongoing increases in the target range will be appropriate.”
  • QT June start, 60bn UST/35bn MBS phase in period of > 3months
  • Global risks a fixture of the presser w.r.t. risk to downshift in growth
  • Powell rejects the idea that he would surprise with 75bps (see Bostic below

* * *

Fedspeak on the use of 75bps:

Mester (4/22)

Q: What about a 75 basis point hike which is something that's been mentioned lately is that something you'd consider?

Mester: As we always say at the fed we consider everything. My own view is we don't need to go there at this point and I'd rather be more deliberative and more intentional about what we're planning to do and I see being on the path we're on now, I would support at this point, given where the economy is, a 50 basis point rise in May and a few more to get to that 2.5% level by the end of the year and I think that's a better path I mean doing one outsize, a one-off outsized move in the funds rate doesn't really appear to me to be the right way to go. I would rather be more deliberative and more consistent in bringing up the funds rate and signalling that that's what the path we're on and then when we get to that neutral rate where policy goes after that is going to really depend on how that policy has affected the economy as well as these other factors we know that fiscal policy is going to be waning this year, the effects of the pandemic results, but we don't know how that's going to look. And so let's be on this methodical rather than overly aggressive path and then see how policy transmits to the economy and see how the economy evolves. It's always good to remember that monetary policy transmits to the economy, the expectations and movements in financial markets so that's why I kind of favor this methodical approach rather than a shock of a 75 basis point I don't think it's needed for what we're trying to do with our policy.

Daly (4/21):

Asked about hiking by a larger amount, Daly says “the tactics about is it 50 (basis points), is it 25, is it 75, those are things I’ll deliberate with my colleagues. But my own starting point is we don’t want to go so quickly or so abruptly that we surprise Americans and make them have to adjust quickly”

Bostic (4/19):

Q: Would you consider 75bp hikes?

Bostic: "I've been saying for months now that any action is actually possible although it's not really on my on my radar right now. But I think what's going to happen is that you're going to see a steady march of our policy, assuming that the economy evolves the way it has the last several months. As we take each step, it will give us an opportunity to observe and adapt our policy based on what we see. Even just now, if you look at what's happening to real wages real personal income, real personal incomes have grown at a negative rate, decreased in last six or seven months and real wages are in retreat. If that continues, there is a real case to be made that demand is going to slow down in ways that our policies will accelerate but it will allow us to not have to push as hard. But all of that is conjecture at this point we're going to have to watch and see what happens and then evolve as are we as we learn the reality. "

Bullard (4/18):

On 75bps:

Bullard: "Yeah, more than fifty basis points is not my base case at this point. I would point out that the 1994 cycle, where we raised the policy rate 300 basis points in a year—first of all, that one was successful and did set up the U.S. economy for a stellar second half of the 1990s, one of the best periods in U.S. macroeconomic history. So it was successful. And in that cycle, there was a seventy-five basis point increase at one point. So I wouldn’t rule it out, but it’s not my base case here."

Waller (4/13):

Q: more than one 50bps?

Waller: "The data has come in exactly to support that type of policy action if the committee chooses to do so. It gives us the basis for doing it. I’ve said before I prefer a front-loading approach so a 50bp hike in May would be consistent with that and possibly more in June and July"

* * *

We'll conclude with a rather cynical view, commenting from the latest Bear Traps Report from Larry McDonald who best  summarized what's at stake today:

The Fed went to 50BN a month in September of 2018 and had to stop five minutes later in December this was after promising Wall St economists they were on Auto pilot all the way up to a 2T reduction. Now, they are going to give it a try at 90B a month in May with back to back 50 bp hikes? Who are they kidding?

It's the worst start to a year for stocks in decades, consumer savings is down to the bone, GDP prints negative, and the Fed is going to kick off a record tightening cycle? It´s all a show. With conviction we see a near term top in the US dollar and another leg up for hard assets, value vs growth and emerging markets.

Tyler Durden Wed, 05/04/2022 - 12:45

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Spread & Containment

The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…



The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…



Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.


A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…



By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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