Co-founder and CEO of Real Vision Raoul Pal says the FED must stop quantitative tightening. He further discusses the next bull market, amongst other things, in a newly released YouTube interview.
Raoul Pal, in a +50 minute interview with Thinking Crypto, discusses how the pandemic from 3 years ago has led to a spike in interest rates. He notes that interest rates skyrocketed due to the spike in inflation, which also slowed down the economy. Here are the logical reasons behind his prediction.
Raoul Pal Predicts FED Will Stop Quantitative Tightening
The CEO of Real Vision compares the present market scenario with similar events in late 2018. Notably, this was when the repo and partly bond market blew up. Of course, the FED had to stop raising rates; months later, they stopped QT and cut rates.
Furthermore, he says FED is close to stopping rate hikes. The recent FED rate hikes have always impacted the crypto market, particularly Bitcoin. This is because investors’ sentiments are tied to those figures released monthly. Now, that seems to be coming to an end soon enough, according to recent insights.
In Pal’s words: “I think we’re in a similar kind of zone where the FED has stopped raising interest rates. Soon, they’ll have to stop the bond yields rising by yield curve control. Otherwise, if the inflation falls fast enough, they’ve got to start cutting rates again to roll these interest payments at a lower level.”
Raoul Pal Believes That Disinflation May Cause The FED To Drop Rate Hikes
Earlier, Pal mentions that interest rates shot up because inflation increased, so he predicts that the reverse could make FED drop rate hikes. He reveals that inflation will drop for a long time because two main factors drive inflation:
- The short-term factors that cause quick change in inflation like commodity prices (oil and gas) and the dollar rate.
- Long-term factors that don’t immediately affect inflation include rents and wages, which he describes as ‘lagged’.
Furthermore, Pal predicts we will see a fall in inflation where commodities start pricing on the other side of the business cycle. Eventually, inflation will continue to grind lower over time. Disinflation will occur going forward, and the labor market will become weak, which may give the FED an excuse to drop interest rates.
Pal says there should be changes in Q4 2023 (when liquidity returns to the markets). However, some banks would likely blow up if the yield curve stays. There is currently a high number of debts due to the interest rates, which has put US banks under pressure.
Conclusion: Raoul Pal Discusses The Next Bull Market
Conclusively, Raoul Pal didn’t explicitly give a time for the next bull run. However, he suggested that the Federal Reserve will stop quantitative tightening and cut interest rates in Q4 2023. Then, it’s safe to say that the next bull market will likely come sooner than many expect. He also points out that liquidity will start coming to the market, which is a good sign for a bull market.
However, he further warns that banks are under pressure and a possible mild recession will happen soon. This, of course, could impact the timing and strength of a potential bull market.
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