Otavio (Tavi) Costa
"The Fed's press conference from yesterday is likely to be remembered as one of the most important macro events of this decade.
Any policymaker seriously committed to fighting inflation would never publicly announce an intention to start cutting interest rates before achieving their ambitious price stability target.
Keep in mind that this dovish communication happened on the back of a core CPI still at 4%, with government spending exceeding 20% of GDP, rising deglobalization forces, widespread labor strikes, and an exceptionally supply-constrained commodity market.
Interestingly, this historic moment was also evident in the movement of real yields, which saw its most significant decline since the Global Financial Crisis and the Covid recession.
This reflects how, in such a highly leveraged economy with asset valuations reaching absurdly expensive levels, financial repression must always be reinstated, even if it means inflation remains higher than historical standards.
Hard assets are imperative to navigate this next market cycle."
