Fed Faces Challenges in Slowing Economy Amid Low Corporate Interest Payments

The Federal Reserve's (Fed) ability to slow down the US economy is being called into question. According to SocGen's Albert Edwards, corporate net interest payments remain low despite rising mortgage rates. This suggests that higher rates may not have a significant impact on the economy.

Edwards pointed out that in the past, higher rates would directly squeeze corporate profit margins. However, with corporate interest payments at an all-time low, it's unlikely that the Fed can slow down the economy by raising rates.

In fact, Edwards stated that 'to slow the economy, Fed Funds would have to rise higher than it would otherwise.' This raises doubts about the Fed's willingness to do what's necessary to slow the economy in a supply-constrained environment.