Fed walking tight rope w/o a net

So Fed chief Jerome Powell did exactly what I said he would do Wednesday morning. He held rates steady in order not to undo the European stimulus plan unveiled Tuesday to keep the EU out of recession for a little while longer.

He also gave a hat tip to the President by saying there may be a rate cut this summer.

Trump tweeted Wednesday night:

Powell’s action Wednesday and Trump’s tweet cannot truly be reconciled.

Lowest unemployment in decades along with new highs in stocks and little official inflation should have the Fed at least talking about raising rates.

But look at the government bond market –the adults in the room — yields are so inverted or perverted that they are flashing theĀ  traditional signal that a recession is coming soon.

Look at the sovereign debt in Europe, many countries 10-year government bonds are trading at negative yields, which means you are losing money holding that note to maturity.

This is why Trump wants a rate cut. To delay a market selloff leading into the 2020 election. A 50 basis point cut at the next meeting — after the initial pop in stocks — will take 12-14 months to work its way through the bond market and the broader economy.

Oh, one other signal on the economy and which I will speak on later, gold is up $35 this morning to $1,384 an ounce. That is a 2.5% move overnight.

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