Price Are Not Trending In The Right Direction
Regardless of whether or not PCE came in line with expectations, the fact is that prices are trending in the wrong direction. Price inflation will get ugly if the Fed feels the need to quickly cut rates this year in order to save the banks. Keep an eye on BofA’s unrealized losses as the BTFP expires on March 11th and as the 10-year Treasury yield remains elevated. The Fed’s Discount window balance will serve as an accurate proxy for bank health in 2H March and in the subsequent weeks and months.
I would expect for February to be another strong sequential PCE print. Runaway price increases occur when you have a Central Bank that more than doubles its balance sheet over a two year period (mid-2020 to mid-2022). Americans will never recover their lost purchasing power. The Fed would benefit from having a Chairman that is anti-Fed, anti-money printing, pro-market, pro-American citizen. That will never happen.
