Carry Trade
Ed Yardeni told Bloomberg Surveillance that the so-called carry trade was undermined by the Bank of Japan’s interest-rate hike last week. He said a lot of this selloff has to do with this carry trade unwind. This was the story in 1987 too when similar conditions prevailed sending the stock market sentiments into a tailspin.
1987 Crisis: Fed cuts rates
Then Federal Reserve Chairman Alan Greenspan slashed the bank interest rates and pumped liquidity into the financial system that saved the economy. He has expressed hope that Jerome Powell will take a similar step and cut the interest rates to save the economy from going further south.
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Yerdani expects a 50 basis-point rate cut
Before the stock market bloodbath on Monday, Ed Yardeni said that it would trigger panic in the global market and the Fed would take immediate steps to cut down the rate. On…