The Fed has traditionally used higher interest rates to put a lid on inflation which, unless oil and gas promptly reverse their moonshot, will soon reach 2.5-3%. Yet the unflappable Mr. Powell insists that the Fed isn’t concerned and has no intention of raising rates any time soon.
So, what does it mean that the very concerned market is doing it for him, even as he speaks? Does that not count?
The morning-after talking heads have reminded us that rates were much higher than 1.5% in past years. True, it was over 5% in 2007. But national debt was only $9 trillion. Might it matter that debt has more than tripled since then?
The concern, of course, isn’t the notion of paying slightly higher interest rates on $2-300 billion in issuance over a transitory period of higher inflation. The concern is that inflationary pressures in addition to spiking oil/gas prices are building and that the Fed might have painted themselves into a corner.
Is Mr. Powell simply unflappable or are he and his colleagues possibly blind to the mounting risks?
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ES tagged our next downside target yesterday. It was two days ahead of schedule, but it counts all the same. Now the bounce, aided of course by VIX’s ubiquitous 18% smash-and-grab and 200-DMA backtest. continued for members…
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