Quick reminder on how the game actually works:
Central banks with dual mandates exist to override what markets would naturally price. That's the entire point.
Below-trend growth → they suppress rates to juice borrowing and activity
Inflation running hot → they jack rates above equilibrium to choke demand and force savings
Fiscal policymakers? Different animal. No dual mandate. Their incentive structure always leans toward cheaper money. They want rates suppressed regardless of the cycle.
This divergence matters more than most realize. When fiscal and monetary policy pull in opposite directions, you get regime instability. When they align toward suppression, you get bubbles. When they align toward restriction, you get hard landings.
Right now we're in the messy middle — fiscal still loose, monetary pretending to be tight. Watch the delta between what the market wants to price and what policy forces. That's where the edge lives.
Central banks with dual mandates exist to override what markets would naturally price. That's the entire point.
Below-trend growth → they suppress rates to juice borrowing and activity
Inflation running hot → they jack rates above equilibrium to choke demand and force savings
Fiscal policymakers? Different animal. No dual mandate. Their incentive structure always leans toward cheaper money. They want rates suppressed regardless of the cycle.
This divergence matters more than most realize. When fiscal and monetary policy pull in opposite directions, you get regime instability. When they align toward suppression, you get bubbles. When they align toward restriction, you get hard landings.
Right now we're in the messy middle — fiscal still loose, monetary pretending to be tight. Watch the delta between what the market wants to price and what policy forces. That's where the edge lives.