Markets are pricing in 'hopium' via the Fed for a 50 basis point cut on 18th September 2024 before the U.S. elections. Never mind 'sticky' U.S. inflation via the CPI and PPI.
And this could be read as politically motivated, for a larger cut prior to the U.S. elections in November 2024. And within the era of misinformation, conspiracy theories and general nuttiness, one has to tread carefully when making an assertion such as the Federal Reserve Bank maybe showing potential bias. When inflation in the U.S. has not abated, proclaiming to the notoriously flawed Consumer Price Index, that headline inflation appears to be slowing, yet core inflation has increased for August 2024, please refer to Chart 2 from Reuters, maintaining that the CPI is stuck at a Two month average of 0.2%; which is sticky inflation from mostly, but not surprisingly housing and food prices, also seen in the Producer Price Index (PPI). Which, may never edge down in a low interest rate/changing climate environment.
Yet, Fed officials are hinting for a 0.50% cut rather than a 0.25%. which makes no sense why a larger cut, while inflation is stuck, would need to occur. And market analysts are also querying the motivation of a larger cut from the Fed on 18th September, any more or less that it will hold stock markets at their all time highs, which is one of the greatest market fallacies, that stock prices provide liquidity to the broader economy. They do not. Only to investment banks, brokerage firms, in that vain and greedy hope of an Artificial Intelligence or Crypto tech startup, will begin to hire thousands of people (yes, sarcasm is due).
Now, back to 'conspiracy theories' and Donald Trump the epitome of victimizing himself via a political conspiracy, who said in August 2024 when stock markets did sell off 'hard', as the "Kamala Crash" (have since rebounded), reiterating what he earlier said in January of this year, that he wished that that stocks would crash before the U.S. election in November.
But, unfortunately stocks prices and elections in a hyper consumer world via the largest economy on the planet, that being America, do correlate and are used as a reason that the economy is either booming or falling under its current President. But no conspiracy, just corruption. And the problem is, stock prices do not reflect the wider economy, only as a visual medium that appears to give lift to your pension monies, which you can't touch until retirement anyway (others, however can), seem to be doing ok, never mind your rent/rates/mortgage/food/fuel costs on the rise, and so is that forever debt pile.
Chart 2, shows what will happen of the transfixion of American market exceptionalism on a country such as Australia, which his solely reliant on commodity exports, namely Iron Ore, that has priced crashed (below pane, purple line) due to the Chinese recession. The U.S. Central Bank, if it does deliver a massive rate cut in September, will push up the Australian Dollar vs USD, thus making the already very fragile export markets even more pricer, in turn forcing the Australian Central Bank (RBA) to also cut rates to maintain its competitiveness with Chinese commodity imports. Australia is probably already in stagflation 'lite', which may morph, if unemployment spikes to full blown stagflation.
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