All eyes will focus on the Federal Reserve as it wraps up its June meeting. But it’s important to remember the Fed isn’t the only game in town. Moves by the European Central Bank also have a significant impact on the global economy (and the gold market) and it has taken a decidedly dovish turn.
Most analysts expect the Fed to hold interest rates steady in June, but potentially set the stage for a July rate cut. (Although Jim Grant said he thinks the Fed will actually cut this month.)
In December, Peter Schiff predicted that the Federal Reserve was about to hike rates for the last time and that the next step would be rate cuts. Yesterday, Jerome Powell made comments widely interpreted to signal the rising likelihood of a rate cut. The Fed chair dropped the word “patient” from his vocabulary, saying the central bank would respond as “as appropriate” to the perceived economic impacts of tariffs and other economic data.
Peter appeared on Fox Business Countdown to the Closing Bell with Liz Claman to talk about what’s next up for the Fed and how it will impact the economy.
The “Powell Pause” is not enough. President Donald Trump not only wants interest rates cuts; he wants to put quantitative easing back in play.
During an interview Friday, the president once again complained about the Fed’s 2018 interest rate increases, saying “they really slowed us down.” Trump wants stimulus and called on the Fed to resume Obama era QE.
Ever since the beginning of the “Powell Pause,” Peter Schiff has been saying it won’t be enough.
If the Fed doesn’t want to upset the markets, soon it will be forced to go back to QE and zero percent interest rates.”
Peter isn’t alone in saying this. After the most recent FOMC meeting, Ryan McMaken at the Mises Institute echoed Peter’s message.
Put simply: the days of quantitative easing are back, and we’re not even in a recession yet.”
All of a sudden, the Federal Reserve is considering increasing its balance sheet again.
Remember back in September? QE was on “autopilot.” Then we got the “Powell Pause” and suddenly, the talk was that balance sheet reduction could be winding down. Powell confirmed that was the case just a couple of weeks ago when he told a congressional panel the central bank would be in a position to “to stop runoff later this year.”
After weeks of hinting, Federal Reserve Chairman Jerome Powell confirmed that the central bank will end its balance sheet reduction program this year. This just five months after insisting quantitative tightening was on “autopilot.”
“We’ve worked out, I think, the framework of a plan that we hope to be able to announce soon that will light the way all the way to the end of balance sheet normalization,” Powell said during testimony before the House Financial Services Committee.
Was Ben Bernanke lying or just wildly mistaken when he claimed the Federal Reserve wasn’t monetizing the debt in the early days of the financial crisis?
The Fed released the minutes from its January Federal Open Market Committee meeting yesterday. There really weren’t any surprises. The minutes emphasized the central bank will exercise “patience” in raising rates and also signaled that its balance sheet reduction program will end soon. A number of figures at the Fed have hinted that quantitative tightening will end in the near future, including Federal Reserve Governor Lael Brainard and Cleveland Fed President Loretta Mester.
Right after the last Federal Reserve Open Market Committee meeting, Peter Schiff said the “Powell Pause” won’t be enough to save the stock market and head off a recession. He said ultimately, the central bank would have to cut interest rates and launch another round of quantitative easing.
Well, it seems the mainstream is starting to catch up with Peter’s thinking. Yesterday, Bloomberg ran an article asserting that “instead of pausing, the central bank may need to start cutting interest rates to avoid a recession.”
Once upon a time, quantitative easing was considered an “extreme measure.” But it may become more commonplace. According to a Reuters report, central bankers in the US are discussing whether they should turn to that “tool” more often.
In other words, the Fed may make the “extreme” the norm.