Fed Funds Rate Heading to 5.25% and Staying There Longer. Inflation, QT (Quantitative Tightening), Debt Ceiling are all intertwined in a tangled web and discussed.

FFR (Fed Funds Rate) Heading to 5.25% and Staying There Longer. Many financial market participants were hoping for a near-term pause or pivot, and they are disappointed. FFR needs to be above the inflation to be considered tight and reduce inflation. Look at 70s, 80s and 90s history.

QT (Quantitative Tightening) has been slow but Fed Chairman Powell indicated that QT will move forward as scheduled. This would imply a quickening of the pace of balance sheet reduction to catch up.

Debt Ceiling drama is a symptom with high deficit spending and run away debt being the illness. Very difficult if not impossible to fix deficit as interest rates rise and the government’s higher interest expenses add to the deficit and debt and thus increase interest expense. In our opinion, the problem is compounding upon itself and will eventually lead to a Fed pivot and monetization of the debt.