What Makes The Fed So Special
Just minutes before the FOMC announcement, Deutsche’s Jim Reid notes that it’s interesting that we are debating whether the median dot will show the first hike slightly before the start of 2024 or after it. So we’re arguing over something that may or may not take place in plus or minus 30 months.
However as the chart from Reid shows, we have already tentatively started a global hiking cycle, so the Fed are looking set to be well behind the global cycle assuming it is sustained.
Which brings us to a key question from Reid which most have glossed over: “Given that the US has arguably seen the biggest monetary and fiscal stimulus of anywhere in the world over the last year or so and given the output gap will be closed over the next few quarters (it took until 2017 post-GFC), what makes the Fed so special that they can wait as long as they plan?”
As another DB strategist, Alan Ruskin, shows in a recent piece out of 45 countries the US stands out near the top of the global inflation charts across different criteria…
… something normally the exclusive domain of EM countries, a few of which have now started raising rates. The Fed will have no choice but to follow as soon as the idiotic “transitory” vs “permanent” narrative fades away.
Wed, 06/16/2021 – 13:30