Loading ...US budget deficit hits record high for November on interest costs
This is why the FED has to start cutting interest rates, sooner rather than later. It has more to do with the rising budget deficits caused by the higher rates, than it does about the effects on the economy.(although those are real and palpable as well.) So while I am going to be wrong about my post regarding an emergency rate cut today. It is likely to happen in the first quarter of 2024. The market is telegraphing it and the FED isn’t likely to cut in the second half of a Presidential election year unless the economy is in freefall. https://www.reuters.com/world/us/us-budget-deficit-hits-record-high-november-interest-costs-2023-12-12/
The Fed is charged with the dual mandate of stable prices and maximum sustainable employment. They are mandated not to care about deficits. Here is a good article by my favorite economist that talks about rates in 2024.
https://www.ft.com/content/63a4e0ca-ae62-4b35-be18-d27afe4210f8
You make a good point and(El-Erian is excellent) but the longer the FED holds out in leaning towards the 2% inflation goal, the more likely they overshoot to the downside (as they almost always do) to undermine the full employment goal when a recession sets in. Might not seem obvious today but the “long and variable lags” will bring about higher UE next year.