If low inflation, a wobbly economy and tariff jitters weren't enough to push the Federal Reserve to lower interest rates, there's also the simple reason of the swelling national debt.
With all that in mind, the Fed could have no choice but to lower rates, unless it wants to go back to buying Treasurys itself.
"Absent a technical bazooka, stresses will leave one option left: more rate cuts," he said. Reductions in the benchmark overnight funds rate will need to be "aggressive enough to re-steepen the Treasury curve such that dealer inventories can clear and inventories don't drive funding market stresses."
Markets already expect the Fed to cut rates after July's 25 basis point reduction, the first time that had been done in nearly 11 years. Popular reasons for the cut are., the persistently low inflation that policymakers fear has held back living standards, and the ongoing tariff war with China.
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