By
Borsgade
Bridgewater Co-CIO, Karen Karniol-Tambour, and her team assess the trickers needed for the FED to lower interest rate in the US. The buttom line: The Private Sector Response to Easier Conditions Will Be a Key Factor.
As financial conditions ease with the Fed’s pivot toward a more dovish stance, we see the private sector in a strong position to respond to lower rates and easier financial conditions. Balance sheets are unusually unencumbered at this stage of the expansion and are coming out of a sustained period of deleveraging, while wages are still rising at a healthy clip.
This means that Fed easing is likely to be stimulative, which in turn will limit how much easing makes sense given the strong starting point of the economy.
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