PremiumFed's Rate Cut Sends Excess Liquidity Soaring, Sparking Next Risk, Inflation Surge
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By Simon White, Bloomberg Markets Live
A loosening in global and now US monetary policy and a weaker dollar are boosting already robust excess liquidity. Along with low near-term recession risk, the backdrop remains favorable for stocks to continue in their primary uptrend.
The Federal Reserve has eased. It’s been a while coming, the second-longest period in 70 years in between Fed rate cuts and the first reduction since March 2020. It was also an outsized one, with the Fed choosing to kick off its rate-cutting cycle with a 50-bps reduction. But not only have financial conditions almost never been looser when the Fed begins easing, excess liquidity – far from rolling over – remains strong and looks set to get stronger. Longer-term inflation risks, rather than receding, are set to rise.