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The Effective Fed Funds rate from monthly averages 1 to 32 years reveals the same story as last December / January. Although Averages improved. The shape of Averages is contained as a Bell Curve by humped in the middle while left and right tails trade low yet acceptable.
Humped in the middle, best described as Leptokurtic was the result to Bernanke and Yellen’s 0 interest rate policy. Without Bernanke and Yellen policies, averages would actually trade as a flat line across all averages.
Averages from 1 to 7 years trade overbought yet the degree of overbought lacks any concept to extremes. The extremes to low and overbought averages are located from 8 to 25 years. Averages from 25 to 32 years are actually in good shape.
Based on averages 1 to 7 years and 25 to 32, Powell and the Fed actually accommodates the possibility to raise if necessary. The distribution of averages would then form a Leptokurtic curve as the middle hump rises but thins and the right and left tails flatten further.
The problem to Fed Funds at 5.33 and 32 year monthly averages is 5.33 is not captured by the data. Fed Funds by speculation trades around the 50 year average and the same location as DXY at 99.00 and GBP/JPY at the 37 ad 38 year monthly averages at 181.07 and 184.14.
The proximity to 5.33 is 4.70 and the vital line to break to possible rate cuts. At 4.70 is followed by many averages at 2.00’s and located from 25 to 32 averages.
Targets are located at 4.00’s across the board from averages 25 to 32. This means about 100 points to possible drops or 25 points X 4.
Powell and the Fed lack an immediate urgency to slash rates. Longer term, an interest and exchange rate lack any possibility to trade at 50 year averages.
The proper location for Fed Funds and DXY and to declare healthy markets is trade at averages 1 to 10 years. DXY and Fed Funds would then not only match perfectly to SPX 500 but far better movements would be seen. SPX at 82 points per month for 2023 is the result of misplaced DXY and Fed Funds.
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