exclusive : Fed to Cut Interest Rates: Recession Update in The USA

 

1. Economic Boom: The U.S. economy is reported to be booming, with a positive GDP growth of 4.9% in the third quarter, later revised to 5.2%.

2. Federal Reserve and Interest Rates: Despite the booming economy, the Federal Reserve is not expected to raise interest rates further. The FED funds interest rate is currently at 5.5%, and there are indications that it might be the peak for this economic cycle.

3. Market Expectations: The market is signaling an 89% chance that the Federal Reserve will cut interest rates by the May 1st meeting, which is a significant shift from a month ago when there was a 40% chance of a rate increase.

4. Reasons for Rate Cuts: The Federal Reserve may consider cutting interest rates not because the economy is struggling but due to their success in lowering inflation. The idea is that lower interest rates could encourage borrowing and spending.

5. Economic Projections: Goldman Sachs projects a 2.1% GDP growth in 2024, indicating a slowdown from the current 5.2%. The probability of a recession in the next 12 months is estimated to be 15%.

6. Jamie Dimon's Warning: CEO of JP Morgan Chase, Jamie Dimon, issued a recession warning, expressing concerns about dangerous and inflationary elements in the economy.

7. Soft Landing Expectation: The U.S. Treasury Secretary, Janet Yellen, is optimistic about a "soft landing" for the economy, with unemployment stabilizing.

8. 10-Year Yield and Stock Market: The 10-year yield's sharp decline, influenced by the Federal Reserve's signals, creates a "risk-on" environment, leading to a surge in the stock market.

9. Inflation and Federal Reserve's Response: Inflation is currently above the 2% target, but the Federal Reserve might cut interest rates if inflation continues to decline consistently.

10. Expectation of Interest Rate Cuts: The speaker believes that the Federal Reserve will eventually cut interest rates in 2024, but May 1st might be too soon. There are concerns about a potential asset price inflation ("melt-up") in 2024.

11. Consumer Finances: The speaker mentions the need for a separate video to discuss the states of U.S. consumers and challenges the media's portrayal of American financial strength.

12. Conclusion: The speaker anticipates the Federal Reserve holding off on rate cuts for an extended period, aiming for a "soft landing" in 2024, and expresses concerns about potential asset price inflation.