The Trucker Revolt
Truckers maintain focus:
As reflected below, the Trucker Revolt is underway:
Houthis continue to add Fire to the Fuel:
As reflected below, the Trucker Revolt is underway:
LANGUAGE WARNING: This trucker went absolutely nuclear on liberals. 🔥
— Steve 🇺🇸 (@SteveLovesAmmo) February 20, 2024
Remember a few years back when truckers boycotted Colorado?
If you don’t, look it up.
Pepperidge Farm remembers. #Truckers4Trump #LiberalSinkingShip pic.twitter.com/57DpESekIB
Houthis continue to add Fire to the Fuel:
The continued Houthi militants’ attacks on container ships will impact prices, predominantly in Europe. The combined effect of these dual shipping crises creates pressure for increased inflation on both sides of the Atlantic that may feed into each other.
The Fed’s Headache Grows Larger
Inflation returned in advance of the Truckers:
As we reported on February 13th in The Thief in the Night is Back with a Vengeance, the annualized inflation rate for the last three months ended January printed at 4% and beat expectations of 3.3%, reflecting a sharp rise in inflation at the end of the year and first month of 2024.
As we reported on February 13th in The Thief in the Night is Back with a Vengeance, the annualized inflation rate for the last three months ended January printed at 4% and beat expectations of 3.3%, reflecting a sharp rise in inflation at the end of the year and first month of 2024.
The banks shift expectations, albeit maintain hope for cuts:
Prior to the 4% inflation surprise, futures markets reflected Wall Street’s expectations of six rate cuts of 25 basis points this year, starting in March, which would bring the Fed Funds rate down by a full 1.50% by the end of the year.
After the new inflation data, Bank of America reported reduced expectations in their February 20th Morning Market Tidbits letter forecasting 3 rate cuts of 25 basis points each this year starting in June instead of 6. Yet the bank cautioned further that “for now, risks to our growth forecasts are slightly to the upside. If this leads to stickier inflation, Fed cuts could be delayed.”
Goldman Sachs, in its February 16th gfi-weekly, reported its expectations for 5 cuts of 25 points each this year starting in May – however, Goldman also cautions that “risks are skewed to later and fewer cuts should the trend in economic data persist.”
Note, these banks could not shift their view too aggressively without risking reputational or financial harm – the volatility introduced to the market and their own books would have been calamitous and this vindictive administration would have been livid; hence they shifted expectations moderately and kept pressure on the Fed.
Prior to the 4% inflation surprise, futures markets reflected Wall Street’s expectations of six rate cuts of 25 basis points this year, starting in March, which would bring the Fed Funds rate down by a full 1.50% by the end of the year.
After the new inflation data, Bank of America reported reduced expectations in their February 20th Morning Market Tidbits letter forecasting 3 rate cuts of 25 basis points each this year starting in June instead of 6. Yet the bank cautioned further that “for now, risks to our growth forecasts are slightly to the upside. If this leads to stickier inflation, Fed cuts could be delayed.”
Goldman Sachs, in its February 16th gfi-weekly, reported its expectations for 5 cuts of 25 points each this year starting in May – however, Goldman also cautions that “risks are skewed to later and fewer cuts should the trend in economic data persist.”
Note, these banks could not shift their view too aggressively without risking reputational or financial harm – the volatility introduced to the market and their own books would have been calamitous and this vindictive administration would have been livid; hence they shifted expectations moderately and kept pressure on the Fed.
The Fed’s Quagmire of Existing Inflation and Rising Exogenous Shocks:
The Fed faces a precarious situation as cutting rates in the presence of rising inflation could easily drive inflation higher. In fact, back on January 16th, prior to the higher inflation data, IMF Managing Director Gita Gopinath stated:
“We still have labour markets that are relatively tight in the US, and including the Euro area. So we should expect rates to come down sometime this year. But based on the data that we’re seeing right now, we expect this to be more likely in the second half of this year. . . . Now we're in a world where we have far more supply shocks that are much more severe, and we've seen that inflation can come back pretty strongly.” https://www.weforum.org/agenda/2024/01/interest-rate-cuts-imf-global-leaders-davos/
Gopinath considers the likelihood of supply shocks interfering with rate cuts. A Trucker boycott of NYC appears an example of an exogenous supply shock Gopinath predicted.
Other inflationary activity clearly on the Fed’s radar:
The Fed faces a precarious situation as cutting rates in the presence of rising inflation could easily drive inflation higher. In fact, back on January 16th, prior to the higher inflation data, IMF Managing Director Gita Gopinath stated:
“We still have labour markets that are relatively tight in the US, and including the Euro area. So we should expect rates to come down sometime this year. But based on the data that we’re seeing right now, we expect this to be more likely in the second half of this year. . . . Now we're in a world where we have far more supply shocks that are much more severe, and we've seen that inflation can come back pretty strongly.” https://www.weforum.org/agenda/2024/01/interest-rate-cuts-imf-global-leaders-davos/
Gopinath considers the likelihood of supply shocks interfering with rate cuts. A Trucker boycott of NYC appears an example of an exogenous supply shock Gopinath predicted.
Other inflationary activity clearly on the Fed’s radar:
- As reported by Zerohedge, the Administration plans to tariff Aluminum and Nickel following the murder of Navalny; prices are rising in response.
- Oil prices are on the rise as OPEC finds disclipline amidst global conflicts. Zerohedge reports: “A nearly balanced market in the first half of the year and seasonal strengthening of demand in the second half are set to push the price of Brent Crude to $88 per barrel by the end of 2024, according to analysts at Deutsche Bank.
The Fed Needs to Maintain Independence in Election Season
While this Administration willingly interferes with the upcoming presidential election as much as possible, the same cannot be said for the Fed. Reputationally, the Fed does not want to be caught making a clear effort to save an election so it looks to avoid substantial actions when too close to an election. If the Fed were to stretch to accommodate the Administration and Wall Streets’ demands for cuts, this would appear political.
“The Fed strives to be independent. But policymakers’ decisions over the next 12 months could conceivably decide the elections.” https://www.nytimes.com/2023/11/17/business/federal-reserve-economy-2024-elections.html
In summary, the Fed needs to consider:
1. rising inflation
2. anticipated shortages in NYC from the Trucker boycott increasing inflation
3. potential effects from the Houthi havoc increasing inflation
4. the risk of breaching Fed independence through cuts too close to the election
5. All the while the Administration continues to foster inflation via foreign policy and voracious continued spending
In conclusion, the Fed’s gauntlet appears perfect – the Fed cannot raise rates.
“The Fed strives to be independent. But policymakers’ decisions over the next 12 months could conceivably decide the elections.” https://www.nytimes.com/2023/11/17/business/federal-reserve-economy-2024-elections.html
In summary, the Fed needs to consider:
1. rising inflation
2. anticipated shortages in NYC from the Trucker boycott increasing inflation
3. potential effects from the Houthi havoc increasing inflation
4. the risk of breaching Fed independence through cuts too close to the election
5. All the while the Administration continues to foster inflation via foreign policy and voracious continued spending
In conclusion, the Fed’s gauntlet appears perfect – the Fed cannot raise rates.
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