Forward Guidance The Fed Is Still Choosing to Be “Late” On Rate Cuts | Weekly Roundup
21 snips
Jun 20, 2025 
Joseph Wang, a former member of the New York Fed and known as Fed Guy, dives into the Fed's recent hawkish pivot and the looming specter of stagflation. He discusses Powell’s strategy of delayed rate cuts and implications for bond markets, including SLR exemptions and TGA refills that could spike yields. Joseph also explores the decline of U.S. dollar dominance and offers insights on navigating a perilous asset landscape, particularly with the potential shake-up from the 2026 Fed chair appointment.
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Fed Delays Rate Cuts Intentionally
- The Fed is choosing to be "late" with rate cuts, waiting for the unemployment rate to rise before easing policy.
- This reflects a hawkish commitment despite softening labor market indicators and inflation data.
SLR Impedes Treasury Market
- The Supplemental Leverage Ratio (SLR) imposes capital costs on banks holding safe assets like treasuries, constraining their market activities.
- Regulators consider easing SLR to encourage banks to buy more treasuries and stabilize yields amid growing Treasury issuance.
Bill Issuance Drives Yield Pressure
- Bill issuance is increasing significantly, forcing the Treasury General Account (TGA) to rebuild after debt ceiling delays.
- Past TGA refills caused large rises in long bond yields, posing liquidity and market risk this time as reverse repo buffers are lower.