The inflation loop

Something about this comment made me scratch my head…

"The rise in the PMI in November reflects accelerating growth, fueled by optimism over lower interest rates and business-friendly policies," said Chris Williamson, chief economist at S&P Global Market Intelligence.

What this tells me is “higher for longer”, it’s likely here to stay. If the economy is so sensitive to interest rates that the minute the prospects of lower rates is communicated by the Fed, growth returns, then I would think the pace at which rates fall will have to slow.

On top of that, throw in Trump’s promise of business-friendly policies, a yet-to-be-seen factor, and the Fed really can’t lower rates very fast, no matter how desperates commercial real estate borrowers with maturing loans may be.

This could mean 25 bps here and there over the next 6 - 18 months, but the wholesale big cuts we all want, absent a recession, don’t seem realistic anytime soon.