Fed Terminal Rate Falls To 5.475% On Only 311k Jobs Added After 504k Jobs Added In January (Silicon Valley Bank Seized By Regulators)

Confounded Interest ^ | 03/10/2023 | Anthony B. Sanders

[Kaiser8408a]

Its just like The Fed. The Taylor Rule says that The Fed’s target rate should be 10.29%, but now the terminal rate has been lowered to 5.475%, almost half of where the target rate should be.

Today’s jobs report for February was a huge disappointment IFF you expected another blowout jobs report like the one from January (504k jobs added). February saw just 311k jobs added, a decline of -38.3% MoM.

And just like that, The Fed’s terminal rate fell to 5.475%, a far cry from the 10.29% rate according to the Taylor Rule.

Today’s Fed Funds Target rate is 4.75% leaving only 72.5 basis points to move.

Of course, Powell until recently followed the Yellen Rule. That is, keep rates at 25 basis points.

This is a classic communications breakdown between The Fed and the economy.

Let’s see if The Fed holds course with Silicon Valley Bank collapsing in biggest failure since 2008.

Silicon Valley Bank became the biggest US lender to fail in more than a decade after a tumultuous week that saw an unsuccessful attempt to raise capital and a cash exodus from the tech startups that had fueled the lender’s rise.

Regulators stepped in and seized it Friday in a stunning downfall for a lender that had quadrupled in size over the past five years and was valued at more than $40 billion as recently as last year.

The move by California state regulators to take possession of the lender, known as SVB, and appoint the Federal Deposit Insurance Corp. receiver underscores the impact that the US’s rapid interest-rate increase is having on smaller lenders.

RIP Gary Rossington, the last remaining Lynyrd Skynrd original member.

[Kaiser8408a]

The Fed will NEVER get back to normal because they are TOO POLITiCAL.

[blackdog]

1.5% money has consequences. When you need to actually show value in a business or loan, 5% paints a much more clear picture.

[monkeyshine]

I wouldn’t rule out manipulation of the treasury yields as part of an effort to prevent huge bank losses on their older low yield treasuries. Not easy to do but either the Fed or the Treasury has the ability to buy into the market and bring yields down. Especially if some big banker makes a phone call.