The media and pundits are likely to once again, get it wrong. It has become general consensus(like last time) that the FED will cut 25 basis points. I believe they should and probably will, cut 50, again.

Everyone is hung up on inflation(which is and will continue to be an issue, but not the issue.) The economy is weak and getting weaker. With the election behind us there will be less fudging and hiding that weakness.

The so called neutral rate is arguably between 3-3.5%. That means the FED, which no longer wants tight conditions, needs to get closer to that neutral rate as soon as possible. Voila, 50 basis points with another likely cut in December(that one may be only 25?)

The recent backup in rates is not surprising and is what was necessary to get the yield curve heading back towards normal. The two plus years of inversion, was too tight for too long.

Until the FED funds rate gets down into the 3-3.5% area, the curve won’t be in it’s normal steepness, that reflects neither tightness nor easing. The quicker it gets there, the better.