Tag: Federal Reserve

Global Inflation Prompts Action By Central Banks

Posted on by The INO.com Team

Inflation is not limited to the United States. It is a global phenomenon prompting central banks worldwide to take action. Central banks worldwide are quickly moving to a more aggressive monetary policy in an attempt to stave off the spiraling international level of inflation. The president of the Federal Reserve Bank of New York, John Williams, spoke to Bloomberg Television saying that a .50% hike in interest rates is a ‘very reasonable option’ for May.

He also addressed the endgame and timeline to achieve interest rate normalization, saying, “We need to get to a more neutral or normal level of the fed funds rate, though whether that would be the end of the year or exactly when will depend on the data... The Fed should get “real” interest rates, nominal borrowing costs minus expected the inflation rate, back up to a more normal level by next year.” Continue reading "Global Inflation Prompts Action By Central Banks" →

Fighting The Eternal Fire

Posted on by George Yacik

The Federal Reserve’s vaunted independence, which we heard so much about during the Trump Administration but very little so far under President Biden, will be put to the test this year as it battles 1980s-style inflation during an election year. Will the Fed fight vigorously to fight inflation that now totals an annualized 8.5% according to the March consumer price index, as it now insists it will, or will it suddenly wimp out just before November 8 if it senses that raising interest rates to the point of recession is a cure worse than the inflation disease?

Needless to say, the Fed is just as guilty as the fiscal authorities for creating runaway inflation, no, we can only blame some of this on Vladimir Putin. Since the 2008 global financial crisis, with just a couple of short, minor pauses, the Fed has kept interest rates artificially low and pumped trillions of dollars into the economy long after any emergency justified it doing so. Now, finally, the Fed has come to the realization that monetary accommodation has gone on too far and too long and is now ready to tap on the brakes. It’s already begun the interest rate raising process and will soon start reducing “at a rapid pace” its $9 trillion balance sheet, according to Fed Vice Chair designate and current Fed Governor Lael Brainard.

“It is of paramount importance to get inflation down,” the formerly dovish Brainard said recently at a Minneapolis Fed conference. Continue reading "Fighting The Eternal Fire" →

Gold Rises Ahead Of CPI Inflation Report

Posted on by The INO.com Team

As of 4:44 PM EDT gold futures basis, the most active June 2022 contract is trading up $11.70, a gain of 0.60% at $1949.50. There were some alarming forecasts for the upcoming release of the latest inflationary data vis-à-vis the CPI (Consumer Price Index) on Tuesday, March 12. Just last week, estimates were released by the Federal Reserve Bank of Cleveland, which revealed a detailed estimate of the upcoming CPI report indicating that the level of inflation in March could run as high as 8.41%. Furthermore, estimates for the first quarter of 2022 predict inflationary pressures quarter over quarter could swell as high as 9.1%.

inflation

The chart above is a 240-minute candlestick chart of gold futures. We have included trendlines highlighting a series of lower highs as well as a series of higher lows. This has created a compression triangle and breakout above the current resistance level. This indicates that gold has concluded its consolidation period and moved back into a solid rally mode. This puts our next target for potential resistance at $1967.60. Above that price point, there is resistance at $2000 and major resistance at $2016. Continue reading "Gold Rises Ahead Of CPI Inflation Report" →

Jobs Report Supports Aggressive Rate Hikes

Posted on by The INO.com Team

The most recent jobs report supports aggressive Fed rate hikes, to reduce inflation, but other factors need to be resolved to solve the big global picture.

The Bureau of Labor Statistics released some welcome news today. 431,000 Americans became gainfully employed in March, and the jobless rate was within 0.1% of 3.5%, coming in at 3.6%. Economists polled had forecasted that over 500,000 jobs would be added. However, that has little relevance with today’s report indicating that the labor market in the United States is vibrant and strong. The strength of today’s report shows that America’s workforce is now only 1.6 million jobs, or 1% of the levels that existed before the pandemic. It must be noted that higher employment is a byproduct of a tight labor market that has had to offer higher wages to attract new workers.

This solid report will give the Federal Reserve the necessary data to continue to raise rates, most likely at a much more aggressive rate. However, the Federal Reserve will have a near-impossible mission to have a soft landing as they reduce the current inflation rate to an acceptable target rate which has been 2%. Continue reading "Jobs Report Supports Aggressive Rate Hikes" →

Fed Not Hawkish: Hellflation Or Liquidation Ahead

Posted on by Gary Tanashian

Is the Fed trying to blow another, more covert asset bubble?

[edit] With a note that another, less viable option is possible as well. That would be a ‘just right’ Goldilocks gently disinflationary option similar to the 2012-2019 phase.

[edit2] A subsequent post notes another reason the Fed may be erring dovish, as the Bank sector negatively diverges long-term yields (30yr has ticked the underside of our target zone of 2.5% to 2.7%, after all) and the yield curve continues to flatten.

The asset bubble that almost ended in Q1 2020 was rescued by two main saviors, 1) unsustainable bearish (no, terrorized) sentiment and, even more so, 2) balls out central bank inflation, led by the US Federal Reserve. The resulting bubble leg was in the bag from the moment the dovish Fed made its first headline about asset purchases and rate cuts.

This latest leg of the asset bubble has been under stress in 2022, as the supposed reflection of ‘good’ inflation, the stock market (SPX), has trended down all year. More recently, commodities and precious metals have gotten dinged as well after spiking upward on the Russia/Ukraine war, which exacerbated the Fed’s inflation (as manufactured in Q1-Q2 2020) after the inflationary effects on commodity prices were already exacerbated by pandemic-related supply chain issues. Continue reading "Fed Not Hawkish: Hellflation Or Liquidation Ahead" →