The primary reason prompting the Fed to consider cutting interest rates is the increasing cost of servicing the Federal debt, expected to approach 6% of GDP by year-end. A reduction of 150 basis points could decrease the interest payment by 33%, addressing severe debt imbalances. This environment favors hard assets like real estate, as seen with Blackstone’s extensive acquisitions, while the resurgence of inflation poses a significant risk, highlighted by the recent uptick in ISM services prices, a reliable leading indicator.
Forget about inflation, the labor market, or maybe even politics:
The chart below is likely the primary reason prompting the Fed to consider cutting interest rates.
Assuming current rates remain steady, the cost of servicing the Federal debt alone will approach 6% of GDP by… pic.twitter.com/iYluaBtwIj— Otavio (Tavi) Costa (@TaviCosta) April 10, 2024
Blackstone buying everything with a roof pic.twitter.com/x3oPGFDbh1
— Win Smart, CFA (@WinfieldSmart) April 10, 2024
The resurge of inflation is a real risk today
ISM services prices is an accurate leading indicator for inflation
And it has recently started moving up pic.twitter.com/J7QaNvouGO
— Bravos Research (@bravosresearch) April 10, 2024