- Moody’s downgrade will cut across economics, financial markets.
- Downgrade will have implications for cost of capital, could ripple through economy.
- Will have to wait and see about impact of downgrade on demand for US debt.
- The Fed will have to determine how the downgrade effects an outlook that is already in flux.
- It’s unclear if consumers today can take on the full cost of tariffs given the state of household balance sheets, recent inflation.
- We have to wait 3-6 months to see how uncertainty settles.
- Number of rate cuts this year depends on how things turn out, the details of the tariffs will matter.
- Leaning more towards only one cut this year because it will take time to understand tariffs.
- There’s a scenario where tariffs become less of a story over time.
- If the tariff transition is longer, it may impact consumer behavior.
- Treasury markets are functioning quite well.
- Inflation not moving to target as fast as anticipated.
- Uncertainty means there is higher risk, the Fed only controls one part of the price of capital.
- As things get more expensive, it changes the choices policymakers, households and businesses face, that will influence the path of the economy.
- Have not seen much movement on the jobs side, firms say they don’t have plans for large layoffs.
Bostic is a hawk and he’s not a voting member in 2025. He’s been supporting just one rate cut this year.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
