Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
Stocks are higher this morning as earnings continue to come in. Bonds and MBS are down small.
As expected the Fed maintained interest rates at current levels and highlighted the increased risks to the economy. “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”
Despite the negative GDP print in Q1, Powell was generally constructive on the economy: “Following growth of 2.5 percent last year, GDP was reported to have edged down in the first quarter, reflecting swings in net exports that were likely driven by businesses bringing in imports ahead of potential tariffs. This unusual swing complicated GDP measurement last quarter. Private domestic final purchases, or PDFP—which excludes net exports, inventory investment, and government spending—grew at a solid 3 percent rate in the first quarter, the same as last year’s pace.”
On the subject of tariffs: The new Administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. The tariff increases announced so far have been significantly larger than anticipated. All of these policies are still evolving, however, and their effects on the economy remain highly uncertain. As economic conditions evolve, we will continue to determine the appropriate stance of monetary policy based on the incoming data, the outlook, and the balance of risks. If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short-lived—reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and, ultimately, on keeping longer term inflation expectations well anchored.”
Note that the market-based inflationary expectations are still well-anchored. This is reflected in TIPS breakeven inflation measures over a year out. Consumer sentiment surveys however see inflation returning to 2021 levels. There is a big partisan schism in that data, with Republicans more sanguine and Democrats more alarmed. If the consumer sentiment surveys are polling more Democrats than Republicans it would explain the difference between TIPS and survey data.
The Fed’s concern with inflationary expectations lies in the behavior it promotes in consumers and workers. If it causes consumers to buy more goods in order to beat the price increases, it could create shortages, which would increase prices (inflation). If it causes workers to negotiate higher salaries it would increase wage inflation. If it doesn’t cause these things then its effect is much more benign.
The biggest driver of inflation in 2021 and 2022 was shelter inflation as home prices rose some 20%. Given the affordability issues this time around, another gap up in home prices seems unlikely, especially since the Fed won’t be buying scads of MBS, pushing down rates.
The reaction in the Fed Funds futures was to further decrease the chance for a rate cut in June. The Fed Funds futures now see only a 17% chance of a 25 basis point rate cut. A couple of weeks ago, it was a better-than-50% chance. The December futures see 3 rate cuts this year, which means monetary policy will remain above r-star for the rest of the year.
The Bank of England cut its short term interest rate to 4.25%, making the US the highest interest rate economy of the big developed economies. Separately, Trump announced a trade deal with the UK is imminent.
Filed under: Economy |
All Things in Moderation 
Germany shuts down asylum seeking:
https://www.eugyppius.com/p/breaking-new-merz-government-orders
LikeLike
Good read:
https://rosselliotbarkan.com/p/the-return-of-cuomo
LikeLike
Trump, you magnificent bastard!
https://redstate.com/jenvanlaar/2025/05/08/new-thom-tillis-really-wont-like-trumps-rumored-replacement-pick-for-dc-us-attorney-n2188855
LikeLike
Speaking of DC:
https://www.nytimes.com/2025/05/09/opinion/washington-toxic-trump-watergate.html
LikeLike
Can they really be this clueless about how they come across?
LikeLike
They’re entitled to rule and are very confused right now. Their whole lives they’ve been told if they do X, Y and Z, if their parents are of a certain class, then they get to rule, get relatively wealthy, and be held in high esteem. They’ve never experienced any of this, before.
LikeLike
I remember the finance bros in 2008 and 2009 feeling the same way as obama rode roughshod over the financial system.
seasons change.
LikeLike
The idea that some ancient liberal woman has her finger on the pulse of what MAGA is thinking is laughable
LikeLike
The mean conservatives won’t help Democrats get rid of Fetterman
https://www.theatlantic.com/politics/archive/2025/05/hypocrisy-fetterman-defenders/682753/
LikeLike
The pot needs to call the office, it has met the Kettle and called it black.
LikeLike
How long did the left cover for Dianne Feinstein?
Fetterman is partisanship. The left is incapable of acting any other way.
LikeLike
The problem with this argument is that in the original Ruby-Spears series from 69-77, Scooby-doo did not talk. He made vocalizations, sure, but speaking in the sense that a rational person would consider, “speaking”? No.
LikeLike
The final victory of the welfare state is complete.
https://www.nytimes.com/2025/05/12/opinion/josh-hawley-dont-cut-medicaid.html
LikeLike
Lot’s of MAGA on Medicaid, so it makes sense. D’s really flog this issue, even when all you’re talking about is abuse and fraud. What they should have done is not include any Medicare of Medicaid managment at all in any discussion and just gone ahead and Doge’d it and any savings re corruption, illegals, etc. would be a happy accident.
LikeLike
Interesting thread.
LikeLike
An actual DOGE success story:
https://www.fedsmith.com/2025/05/07/opm-goes-digital-new-era-for-federal-retirement-processing/
The old system:
https://www.washingtonpost.com/sf/national/2014/03/22/sinkhole-of-bureaucracy/
https://www.washingtonpost.com/news/powerpost/wp/2016/06/03/tktk-2/
LikeLike
Sublime.
LikeLike
This is awesome and we get to watch the Democrats knife Fetterman and engineer some way to get him out for free!
The Democrats really care and just want to help. If anything, they’re guilty of caring and loving too much.
And I’m sure it has NOTHING to do with his pro Israel position!
LikeLike
This is better:
https://www.washingtonpost.com/politics/2025/05/12/hogg-dnc-leadership-election-vote/
Love that the party of “democracy” likes to invalidate elections. If they could institute a diversity requirement for regular elections to invalidate them they would.
LikeLike
They failed with Trump but I do not believe they will stop trying. Leading Republicans will be finding themselves in legal jeopardy if they come from red states.
LikeLike
Carville v Hogg
LikeLike
What I love about this is that Washington and most elected Republicans HATE Russ Vought! I was worried about DOGE after Elon, but Vought might actually be better!
https://archive.is/DU5Bs
LikeLike
This is outstanding!
LikeLike
Well, this is interesting.
LikeLike
Obviously a must see.
LikeLike