Yesterday Jerome Powell quite clearly announced a rate cut for the end of July. But what will be the consequences?
Yesterday Jerome Powell quite clearly announced a rate cut for the end of July – the FOMC protocol published yesterday evening was hardly less clear in this direction. But what will be the consequences? Wall Street’s equity markets are celebrating a new all-time high (S&P 500 reaches 3000), and bond markets are seeing a dramatic spread in the yield curve after the previous inversion. But what can a rate cut really do in an environment where financial conditions (availability of credit) are more lax than they have been since 1993, with record US corporate debt? In fact such interest rate cuts do little for the real economy, but they do ensure zombification – this becomes visible in Europe, where more high-risk corporate bonds (junk bonds) have negative returns. See our video (german)!