By Elliott Wave International
Posted September 11, 2024
It's the Federal Reserve's Open Market Committee meeting next week, and the money markets are pricing in a 25-basis point cut in the Federal Funds interest rate. Judging by the chart below, though, it could well be a 50-basis point cut.
It shows that the spread between the U.S. Treasury 2-year yield and the Federal Funds rate is at its most extreme since the 1980s, meaning that the 2-year yield is far below the Fed Funds rate.
Note the occasions when the 2-year yield was below the Fed Funds rate, and it was either a precursor to an economic recession, growth scare or a crisis. Yet the current consensus is that a "soft landing" for the economy is most probable. Given the obvious history, it's incredible that people think this time will be different.
Murray Gunn
Head of Global Research
Elliott Wave International
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