Fed dovishness and a US GDP miss see markets pricing reflation. But global yields are falling, indicating low growth. Low growth + High inflation = Stagflation
The Fed announced that two new repo facilities will be established to ensure dealers can access cash during a crisis. But the Fed has misdiagnosed the problem.
Is it unreasonable for the Fed to take longer to make their decisions amid economic uncertainty? Only if they have more insight into the future. Do they? Nope.
Asking the question feels sacrilegious, given how we are taught that central banks control economies. But, what if they do not actually control interest rates?
Banks saying that demand for loans is low is them blaming consumers/businesses for not wanting loans. But this is one dimensional – there is more to the story!
Wall Street banks are reporting 2Q earnings, and they are struggling with loan growth. Or rather, the lack of it. With rates so low, why is this the case?