Odd Lots Lots More: Did the Fed Just Make a Policy Mistake?
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Aug 2, 2024 Viktor Shvets, a strategist at Macquarie, dives into the recent Federal Reserve's decision to keep interest rates unchanged. He questions if they are behind the curve as economic indicators show slowing growth, including rising jobless claims and declining manufacturing activity. The discussion focuses on the Fed's communication challenges and the risks of policy missteps, emphasizing how geopolitical uncertainties might impact the macro outlook. They also touch on historical economic patterns and their implications for today's investment strategies.
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Fed's Data Dependency
- The Federal Reserve lacks confidence in its models and relies heavily on data.
- This data dependency makes predicting their actions, like the likelihood of a 70 basis point cut, challenging.
Abundance vs. Scarcity
- We live in a world of abundance with excess capital and products, and technology is constantly reducing costs.
- This abundance challenges traditional economic models that assume scarcity and constrained outcomes.
Policy Errors in Abundance
- There's a risk of a policy error due to the economy potentially slowing down faster than anticipated.
- However, in an abundant world, such errors can be reversed swiftly due to readily available tools and quick repricing.