Acknowledging lags is important, but it’s no pivot. It’s a gift of time for inflation to fall further.
What you're not hearing about the end of this Fed tightening cycle
Friday, November 18, 2022
The 10-year yield is below the funds rate. Over 33 years and 3 Fed chairs, that means stop.
Update to Strategic View
One week ago the 10-year Treasury yield fell below the fed funds target rate. Since 1989, in six prior tightening cycles under Greenspan, Bernanke and Powell, such an inversion has halted the tightening cycle. In half of cases there was no recession. Powell has testified before Congress that he believes the 10-year yield represents the neutral rate of interest, so that an inversion to the funds rate means policy is "tighter than you think." By his own logic he is at or above the "restrictive rate" he has been promising. Will he stop? They always have.