Rates Spark: One more 25bp cut, and then we wait | Metals Mine

  • Rates Spark: One more 25bp cut, and then we wait

    From think.ing.com

    At the last FOMC meeting, the Fed announced a freezing of its balance sheet. The roll-off of the MBS portfolio continues, but is broadly offset by the buying of T-Bills. That should then stabilise bank reserves at or near current levels. A dominant rationale for the balance sheet freeze was the prior rise in the effective funds rate (relative to the other fixed policy rates). The spread from the funds rate to the rate on excess reserves (IOER) was 7bp. That had narrowed to 3bp. Not a great look, reflecting liquidity pressures. Fast-forward to today, and the effective funds rate (3.89%) has drifted up even tighter to ... (full story)

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NotAtrader
Dec 9, 2025 6:19pm — Edited
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I guess this will cause a spike down in DXY after which a long trend up. Besides, nothing can make sure that there will be another cut. US economy has always operated on relatively high rates which also give the banks a stronger position in case of a crisis. Lower rates will expose weakness in the bank system and make the monetary system in US vulnerable. In my opinion 25bp cut will be enough to revive the economy, stabilize the labor market and give a breathing room to the loan takers.
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