Do They Mean a Transition to Even More Inflation?

From the Desk of Don Yocham:               A Tale of Two Rates            Evidently, the Fed plans to tighten the monetary spigots. Last week they indicated a plan to reduce the pace of buying long maturity treasury and mortgage-backed bonds by $15 billion per month. This action takes them from their current $105 billion in monthly purchases to $90 billion for November, $75 billion in December, and so on. Unless, of course, conditions change. And with supply lines blowing up worldwide and energy costs soaring – oil prices have doubled over the last year – the odds of conditions changing remain high. The FOMC (Federal Open Market Committee) pointed to strengthening economic activity and fiscal stimulus to justify the move. Now, less buying in no way means tighter policy, just less loose. Besides, the Fed still maintains overnight borrowing rates at zero, exactly as they stood in 2009 during the depths of The Great Financial Crisis. Notably, they still cling tightly to the "transitory inflation" message. Suggesting the money mandarins believe that supply-line constraints, labor-strikes, and vaccine mandates eliminating workers from an already understaffed workforce present nothing more than short-term technical challenges. But I learned a longtime ago to give as much credit to Federal Reserve statements as they give depositors – zero. Every major move dating all the way back to the Asian Financial Crisis of '97 has amounted to nothing but a string of policy errors over 25 years long. And they no longer craft messages to guide markets but create an illusion of control. Instead, when it comes to inflation expectations, I let the bond markets guide me. Starting with one key number… CLICK HERE TO READ MORE... To your success, Disclaimer & Disclosures The information in this email is intended for informational purposes only and does not guarantee specific results as there is a high degree of risk involved with trading. Also, our traders are real traders and may have financial interests in the companies discussed.  Please see our Terms and Conditions for more information.

 

                                                           

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