You hear all this "gotta do whatever it takes to stop inflation". Just saw another article that Fed must cause massive job loss to stop inflation. What in God's name? I get inflation bad, but you know what? YOU ALREADY PRINTED THE MONEY THAT CREATED THE INFLATION. I read in several places that money supply was up by like 25% yearly, I think for the last few years. That is what created the inflation. There is no stopping that. Sure, you might defer it a bit by absolutely destroying the economy, but eventually that inflation will come home to roost because the printed money is not going away. Devastating the economy to try and get rid of inflation is like cutting off your legs and throwing them away to try and lighten a boat that is leaking water - sure the leak might slow down but you need those legs to swim when the water eventually gets high enough! This is an absolute truth. The Fed should not cripple the economy now, the damage (them printing money at a huge rate) is already done. Just stop printing huge amounts of money going forward and the inflation will necessarily peter out after a time. Someone send an email to Powel and link this thread so he can smarten up and get with the program, please...
My two semesters in micro and macroeconomics at NYU back in 1978/79 do not make me an expert on monetary policy. I do think they are moving too far too fast and not giving the current rates a chance to show their effects on inflation. The same way we went too far with stimulus, I expect they will go too far with tightening. This is the way of the fed. What I want to focus on, since this is a trader forum, even though an Economics thread, is what do you do now? I have been a member here under this name since 2016. Before that, at another employer, I was a member for years more. I find when the market is just going up, traders here look for the next “crash” or “tail” event or “black swan” event. All that did is cause long term losses and the one day-see I was right, mentality that over time does not work. IMO, my only words of wisdom are and always have been, trade the market in front of you and not the one you want. Agree or disagree with the fed, either find a way to make money in this market condition or take some time off. My opinion on Fed policy does not make me money. – Just my opinion.
Look at what the Fed says and what base rates suggest about the path of inflation. Core is driven by shelter inflation which lags market rents & housing prices by ~12 months — this means core cpi won’t peak until end of this year / early next year. The fed knows this and reflects this in their estimate of rate hikes (Fed terminal rate as implied by dot plot). Should core cpi accelerate faster than they anticipate then perhaps we see another 25-50bp of tightening. Right now the Fed implied terminal rate is 4.6% while the market (Fed funds futures and forwards) are closer to 4.9%. I think it’s safe to say that the market is pricing in a moderate acceleration in inflation through q1 2023, which they expect will cause the fed to hike additionally in March 23. What happens next month if inflation comes in cooler? Market implied terminal should move down from 4.9% to 4.6%. If inflation accelerated further, the market will fully reflect 5%. What does this asymmetry tell you about how to position and what to prepare for?
I think the Fed is OK so far... considering how badly they F'd up for the last decade! (I get it... people are "screaming bloody murder", but what can one expect? ZIRP for years and years allowed/encouraged lots of leverage "because money had no carry cost... effectively free"... then when accumulated debts and higher interest rates infringe upon "whatever the Hell anyone was doing".. of course there will be pain and adjustments... painful ones.) They reasonaly could do a bit of QT and then perhaps pause to see how things might be "settling". They can always resume restrictive policies later if appears necessary.
They're fighting terrible domestic policy (Biden's war on U.S. energy, which drives up oil/gas prices and thereby almost all other prices) with monetary tools that stifle the economy and markets. I'm no fan of the Fed or what they're doing, but they're basically being asked to drive in a nail with a hacksaw instead of a hammer.
Yeah, really. You'd think a VP of a chart data provider would put dates on the X axis for the relevant period, but maybe my expectations are once again inflated...
Homebuilder sentiment drops to half of what it was six months ago https://www.cnbc.com/2022/10/18/hom...ps-to-half-of-what-it-was-six-months-ago.html
WELL i maybe one of the few that thinks JP is doing a better job than Volker. JP was singing from book /Star of wonder star of light , guide us by thy perfect light.LOl+ true. Besides year$ ago he told liberal loons in Congress stop spending so much money \Gracias/thanks....................................