Research Content
This note examines the recent assertion by Central Bankers that there is little risk in delaying rate cuts. In summary:
Markets are pricing that monetary policy will remain restrictive at year end 2024
The credit cycle is not uniform because of changing bank supply and differing types of demand at various stages of the cycle
Updated data provided in this report shows a widespread further decline in credit growth across the developed world
There is a risk that a stall in credit growth inflicts unnecessary economic difficulties.
Past credit cycles show that low interest rates do not bring a resumption of credit growth, and that it can take many quarters/years for credit growth to resume to the “normal” levels” required to keep a fiat currency system intact.
The longer Central Bankers wait, the bigger the risk to the economy, and thus to disinflation and a need for looser policy in the future and further currency debasement.
In an environment of stalled credit growth, Gold should perform very well, and current bond yields look very attractive.
10 year bond yields are testing very important support levels. A break below the levels outlined would pave a way for the resumption of the bond market rally that started in October23.
Existing identified opportunities remain attractive, and they would be joined by outright bond trades if supports are broken.