well the stops may be taken out on 18th only if the fed cuts - not exactly my expectation.
if they want to cut 50 why they still talk tough now? and frankly the economy does not look as weak as many bashers are suggesting.
why to cut 25? this time it really does not matter what they put into minutes imo. if they cut then they cut and talking the talk becomes irrelevant. do they want to risk inflation fighting credentials (1 day before CPI) and plunging dollar for 25bps compromise with equity markets? I doubt it.
Therefore the best strategy is to keep fed funds stable. they can cut on October by 50 if really needed - at that time they will have all data they need and if they are weak the dollar will be crippled by that time already anyway.
they may cut discount window on 18th but likely only by 25 as they need to keep some distinction to fed funds - after all the collateral is different - and keep some slack.
This strategy possibly makes them huge winners if economy turns to be ok. It would have serious implications for dollar, long bond, curve shape, long term inflation expectation etc.
Ther is of course some risk of embarassement if the economy tanks - but they can at least say that they were serious about inflation and unbemployment was low at the time.
now what happens with ES if they do not cut? personally i believe that's the only scenario how equities may end up going up (maybe after the first day 1-2% selloff).
cheers
if they want to cut 50 why they still talk tough now? and frankly the economy does not look as weak as many bashers are suggesting.
why to cut 25? this time it really does not matter what they put into minutes imo. if they cut then they cut and talking the talk becomes irrelevant. do they want to risk inflation fighting credentials (1 day before CPI) and plunging dollar for 25bps compromise with equity markets? I doubt it.
Therefore the best strategy is to keep fed funds stable. they can cut on October by 50 if really needed - at that time they will have all data they need and if they are weak the dollar will be crippled by that time already anyway.
they may cut discount window on 18th but likely only by 25 as they need to keep some distinction to fed funds - after all the collateral is different - and keep some slack.
This strategy possibly makes them huge winners if economy turns to be ok. It would have serious implications for dollar, long bond, curve shape, long term inflation expectation etc.
Ther is of course some risk of embarassement if the economy tanks - but they can at least say that they were serious about inflation and unbemployment was low at the time.
now what happens with ES if they do not cut? personally i believe that's the only scenario how equities may end up going up (maybe after the first day 1-2% selloff).
cheers
