The Fed's interest rate policy may prove to be fairly powerless versus the ongoing deficit spending and a resulting skyrocketing debt load, all of which is inflationary.
CBO:
Federal Debt Held by the Public
Percentage of GDP pic.twitter.com/gfE3NfCE6g— David Sommers (@dgsommersmkts) October 11, 2023
Wholesale Inflation Continue to Rise at 0.5% In September, Much More Than Expected
Wholesale prices in September surged more than anticipated, underscoring escalating inflationary pressures in the U.S. economy. The producer price index shot up by 0.5%, significantly surpassing the predicted 0.3%, according to the Labor Department. This inflationary trend was predominantly fueled by goods prices, notably with gasoline prices skyrocketing by 5.4%. Despite the Federal Reserve’s aggressive interest rate hikes to curb inflation, these mounting pressures show no sign of abating.
Treasury’s Debt Deluge Is Starting to Cause Cracks to Appear
Rising rates on overnight repurchase agreements are impacting liquidity, extending into areas like T-bills and bank credit. This exacerbates challenges for financial institutions already facing difficulties from the highest US benchmark rates in over two decades. The surplus cash from pandemic-related injections is now depleting, further straining the system.