Every: Fed Fears Stag-flation more than In-flation

In which the author weighs the-cut a-little versus cut-a-lot outcomes

“The Fed cuts a lot when inflation says it shouldn’t, or cuts a little and refuses to hike again when it should. “

If this is September, wait for November

Global Daily Market comments

by Michael Every Global Strategist, Rabobank.

It’s September. It’s time for the first Fed rate cut in years. This was supposed to see the popping champagne corks. Yet, it’s not starting very well.

Yesterday’s US manufacturing PMI and ISM manufacturing surveys pointed to sluggish activity in the sector: sales are slow, stocks are building up in warehouses, and employment is falling. Yet higher wages and higher shipping costs are continuing to push input prices higher. If it isn’t stagflation, it’s something that rhymes with it.