What is the fed going to do about inflation?

Discussion in 'Economics' started by gunner_trader, Jan 9, 2022.

  1. What can the federal reserve do now that they have finally acknowledged that inflation is now a persistent challenge? The fed basically admitted they are behind the curve.
    By keeping interest rates artificially low for almost a full decade the fed has caused mass speculation in the financial markets ultimately causing bubbles. Bitcoin, penny stocks, electric vehicles, stocks going to 1000, I can go on and on. How does the fed get out of this without crashing the markets?
    Oh what a tangled web they wove !
    Last edited: Jan 9, 2022
  2. Oil well fires are a fairly recent phenomenon.
    While the natural reaction is to flee from an oil well fire, somebody still has to put the fire out.
    Two guys from "Boots and Coots" reasoned that if they kept the oil away from the oxygen, the fire could be extinguished.
    The "tool" to keep those two apart (a gas and a liquid) being dynamite, even as the liquid is burning (very hot).
    Certainly, this process is not intuitive to everybody.
    And seems dangerous as hell to the average person.
    During the Gulf War, this method was used.
    This is certainly a high wire act, but it worked.
    Boots and Coots was eventually bought out, I believe by Haliburton (HAL).
    I slightly know about this because I am always impressed with high wire acts.

    What this has to do with inflation and Central Banks ... maybe they want to try a high-wire act ?
    apdxyk and zdreg like this.
  3. RedSun


    Fed made huge mistake with the lax monetary policy and the goal of FULL employment. But this is not the classic scenario that Fed can just raise the interest rate to TAME the inflation.

    Taming inflation by raising interest rate only works if the root of inflation is from an over-heating economy. But the current inflation is not caused by run-away hot economy, but it is from the supply issue and US energy policy. Raising interest rate can't do anything about supply or energy policy. High inflation may bring more money into inflation hedge, such as energy commodities.

    In 2022, I see inflation will continue to go up. Energy and other commodity continue to stay hot too. Fed tightening will only bring down stock prices. With mortgage rates going up, property market is going to cool down too.....
  4. Not sure you've been listening but during the congressional hearings in Dec and the 12/15 FOMC meeting presser, Jay Powell spoke, at length, about the strategy the Fed is adopting to combat inflation. The meeting minutes printed last week also gave further details. This is all public info stuff, go read it.
    apdxyk likes this.
  5. RedSun


    For anyone who follows the Fed, Jay Powell was playing Biden. He used transitory all the time prior to re-nomination from Biden. After his confirmation. Powell changed his tone completely. His re-nomination was a turning point. A lot of smart political moves by Powell and Biden etc...

    It was never transitory. A lot people have been so blind to follow that logic.
  6. MKTrader


    Fedspeak and an actual plan are two completely different things. Coin flipping would yield much better results than relying on the Fed's prognostications, especially in the summer of 2007.
  7. KCalhoun


    The s is going to hit the fan... both bond yields and inflation are way up
    .... fed can't keep propping
    Pricechange likes this.
  8. Overnight


    Don't be a prude. Just say the "shit is going to hit the fan".

    This isn't network television governed by the FCC, dude, it's the Internet. For fuck's sake.
  9. you compare the Feds dot plot against market implied rates to see if they’re ahead or behind the curve. Better than some ad hoc none sense
    Atikon likes this.
  10. MKTrader


    Wow, you completely missed the point. And I'd avoid using Latin if you don't understand the meaning.
    #10     Jan 10, 2022