Tim Duy thinks an inversion is coming. Of course we have already had one kind of inversion, but the kind that Duy is talking about is in the 10 year-fed funds spread. I would definitely agree that it is more likely than not. Duy gets another important thing right as well...
A cessation in rates hikes should not be interpreted as the first step toward cutting rates.
I would only insert the word "temporary" before "cessation" because I would consider it to be temporary until proven otherwise. If the Fed keeps rates constant in March, I would certainly not rule out another increase at the following meeting. Ever since we started talking about when the Fed would "pause" that is exactly how I have characterized it. Unless there is very good evidence to the contrary, I would see it as a "pause" rather than an ending that would presage a decrease as the next move.
Duy also remarks that the Beige Book had "mixed messages." The regional nature of the report does occasionally produce such a result. In any case, there wasn't much in there to change my outlook. Steady as she goes.
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