There are two main axes to consider regarding interest rate hikes.
One is the interest rate itself, and the other is austerity, which also has two aspects.
Is it the Fed's austerity (balance sheet) or austerity that extends to "fiscal" policy?
Constant: There is no fiscal austerity. Increasing liquidity through fiscal policy has been and remains an unchanging objective and phenomenon, and this is still the case today. Vincent's House statement is in this context.
The administration intends to induce inflation. There are no significant signs of major opposition from Wash to this.
Wash is concerned about the possibility of a bubble bursting due to the absorption of liquidity from the 2000 fiscal surplus caused by rate hikes and austerity (balance sheet reduction). Vincent shares this view.
It's a fight between g and r. They are determined to realize growth > interest. Therefore, liquidity will increase significantly regardless of interest rate hikes, and this will be achieved through "fiscal" policies rather than the Fed. This connects with point 1.
Other
Contrary to people's concerns, Trump, Vincent, and Wash intend to tolerate inflation to a certain extent. (According to some analysts) This is intended to deleverage debt and boost growth in order to recreate the debt reduction of the 21st century.
Wash has never mentioned raising interest rates.
Drakenmiller is a radical who argues that even a 25bp rate hike would require the 10-year yield to reach 5.5% for normalization. Therefore, if the Fed raises interest rates, it will have to continue doing so, which will result in an involuntary "austerity" measure that yields to short sellers.
Trump has not specifically mentioned the FOMC interest rate at this time. The last statement was "If they raise rates, I will cut off trade with countries with trade deficits."
Conclusion
Contrary to popular opinion, there is not strong data to support the case for a rate hike.
The strong push from hedging could actually backfire on Wash and Vincent.
It is important to carefully observe the triangular relationship between Miller, Wash, and Vincent.
As people fear, an "interest rate hike" will not lead to the ideal outcome of curbing inflation and securing sound finances. It will suppress growth and worsen fiscal health, while also having a significant negative impact on AI and AI infrastructure, which are currently the pillars of US growth.
There are analysts who are concerned about the possibility of a large adjustment in the short term due to this.
End.
ft. Vincent said, "I am House," and the basis for this is the balance of the Federal government's TGA account, with an estimated usable amount of around $150 billion in the short term.
