GCIThe real reason the Federal Reserve slashed US interest rates by 0.5% last week
Recessions, like cancer, are incredibly difficult to detect early.
Indeed at the start, they typically lurk hidden in the background for quite a while - before finally being declared 3-6 months after GDP has actually turned negative.
This time-lag is probably why on Wednesday, Fed Chair Jerome Powell decided to inject a jumbo 0.5% shot of interest rate immunotherapy into the economy's bloodstream. The idea being to try to kill off any 'hard-to-detect' tumours that are presently circulating there.
However, nothing should be taken for granted. Mr. Powell's super-sized actions might still be too little, too late. In fact, this is exactly what the US yield is currently implying. That the Fed is behind the curve and will be forced to slash borrowing costs by another 200bps over the next 12 months (see chart).
Unfortunately though, we'll all have to wait until the next series of economic blood tests before finding out.
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