🏦 Inflation hasn't peaked and the terminal rate is above what's priced

“You know, our target, the collective wisdom of the market believes that 3% is enough to get the job done. We're right now at 1.5 to 1.75. So if there's any number between 3 and 5 that is the true price, we have a lot of work to do to get there.”

“Well, the lapping effect turned out not to be enough, and inflation is still rising. So we have not yet peaked on CPI. I understand that core we have peaked, but deciding to exclude energy and food, I mean, that's a pretty arbitrary decision.”

“I think that rates are going to go somewhere between 4.5% to 5%. I think Stan Druckenmiller is right. And I've said this, I don't know, I'm now ad nauseum, so I'll just keep saying it. But I think everybody has consistently been wrong. And they have wanted inflation to be a transitory phenomenon that goes away and they've been consistently wrong. Even in our group chat, we see these forecasts, they've been utterly consistently wrong. So rates are going to go higher than people expect. It'll stay around longer than people want. This will have an impact to the economy.”

“So you may be right about where things stand today, but this is about the trajectory right now of the economy and the trajectory is not good. Inflation is not coming down as fast as people were anticipating. It's worse than expected.”

“It's this inflation, as I've said for a long time, is going to be sticky and persistent. I think you're going to see Fed funds at or breaching 5%.”

“kudos to Chamath for basically calling that, you know, when the Fed just a couple of months ago was saying that so-called neutral would be 3 to 3.5%. Chamath was saying, no, it's going to be 4.5%, 5% plus.”

“we seem to have an administration that is enacting and embracing inflationary policies to support what they consider to be economic growth and improved employment conditions in this country. And the unfortunate effect of many of those policies is inflation.”

“No, no, They're going to get to four and a half very quickly. And then something's going to break, like all these guys are saying, I think they're right.”

“I think the way to think about it is this gives the Fed the resolve it needs. It's going to go by 75 It's probably going to go another 75 We're going to have rates by 4 to 450 to 5%, probably within Q1”

“Well, I think that we had, if you take a very balanced view of what happened this week, you have to start, I think, with the Federal Reserve. And really, what they said is rates will probably be higher than all of you think, and they'll be higher for longer than all of you want.”

“My guess is that they'll be too slow to react to the recession. So we'll end up with a period of rates being higher than they should too long, and then they will correct.”

“I do know what Sacks means though, which is that right now we have a risk-free rate that's going to 5”

“If interest rates stabilize at 3%, which is optimistic, and we're servicing $30 trillion of debt, that's roughly $1 billion a year of debt service payments.”

“One of the things we just talked about was the regime change that's happened where, you know, we all have to act differently now that the risk free rate is probably going to get to 5%.”

“My governing principle, I think I probably said it too many times, but I'll say it again. Rates are going to be higher than we like, and they'll stay here longer than we want. So if you use that as a principle, whenever the consensus thinks we're done, it's been pretty profitable to be on the other side of consensus. And so I still kind of maintain that we're probably going to have a 5.5% fed funds rate.”

“you need to get interest rates to be greater than terminal inflation, which means that a 5% Fed funds rate is insufficient. So we're going to need to see a print of five and a half, 5.75%.”

“And the thing that's sort of surprising about what Larry Summers is saying is that if you believe that inflation is gonna come roaring back, that's certainly a contrarian bet. That's not what the market is saying right now.”