Federal Reserve Chairman Jerome Powell all but confirmed a soft pivot by the central bank in its inflation fight on Wednesday, while trying to maintain a hawkish demeanor.
The markets appear to be buying the pivot, but they are ignoring Powell’s “tough guy” spin.
When people talk about “inflation” today, they generally mean rising prices as measured by the Consumer Price Index (CPI). But historically, “inflation” was more precisely defined as an increase in the amount of money and credit causing advances in the price level. Inflation used to be understood as an increase in the money supply. Rising prices were a symptom of inflation.
I find this change in definition problematic. But many disagree with me. They argue that I’m being pedantic and the definition doesn’t really matter all that much.
Based on the Consumer Price Index (CPI), prices were up 7.7% year-on-year in October. That’s a pretty hefty inflationary bite. But we’ve been saying the impact of inflation is a lot worse.
The increased cost of a Thanksgiving meal this year bears that out.
When I was a kid, we used to say some things only “sound good on paper.” In other words, they seem like good plans, but there is no way they’re going to work in the real world.
That’s socialism in a nutshell.
The Pilgrims found this out the hard way during their first couple of years in North America. Their experiment in socialism turned out deadly.
Interest rate hikes get most of the attention as the Federal Reserve fights inflation, but balance sheet reduction is arguably more important. And it’s not going well.
Since the Fed stopped buying Treasuries and started letting bonds fall off its books as they mature, the bond market has experienced increasing volatility and liquidity problems. In fact, there is already talk about the possibility of the central bank abandoning quantitative tightening.
Festival and wedding buying boosted gold demand in India last month and the outlook looks strong moving forward.
Proving that most people have no idea what causes inflation, the majority of Americans in a recent poll said they want the federal government to hand out stimulus checks to combat inflation.
The Federal Reserve sent out mixed messages after its November FOMC meeting leaving markets wondering just how much more the central bank will tighten monetary policy.
As expected, the Fed delivered another 75 basis point rate hike, pushing the Fed funds rate to between 3.75 and 4%. The last time interest rates were this high was in January 2008.
On the surface, the September job numbers looked pretty good. The economy continues to add jobs and the unemployment rate fell. But these headline numbers paper over underlying problems in the economy.
While President Biden brags about job growth, the average American is working more just to maintain last year’s standard of living.
The United Nations Conference on Trade and Development (UNCTAD) got it half right.
The UN agency warned that there is a high risk of a global recession due to central banks tightening monetary policy to fight inflation. But the solutions offered reveal that the UNCTAD has no idea what causes inflation.