One year ago, here was the headline on these very pages:
The Federal Reserve panicked on June 15, 2022 and raised rates 75 bps in an attempt to stem inflation from it’s persistent increase. In the article from last year I stated the following:
The Fed leaked that they are considering, which means the banksters are enacting a rate increase of the Federal Reserve Fed Funds rate by 75 basis points. This is obviously a panic move which will have zero impact on inflation other than tightening consumer credit and creating problems for small enterprises attempting to refinance or roll over short term debt.
And one year later, small companies are beginning to fail at a faster pace, commercial real estate is collapsing, the sugar high of higher rates was worn off by November of last year, and now politics is becoming a primary consideration versus economic reality.
As I warned about in the inflation report yesterday, the only parts of the inflation picture which appear to have provided any relief to consumers was in the reduction in certain foodstuff prices along with lower energy costs. Other than that a 1970’s style embedded permanent inflation seems to be woven into America’s economic fabric and other nations no loner wish to participate in the spread of our infection and are seeking commerce in alternative currencies to cushion the blow.
Today the Fed will blunder again if the “experts” are correct. The Financial Times story highlights everything the Bubblevisions and markets are projecting for today:
IF, and it would appear there is a 99% chance of this happening, the Fed decides to “pause” their rate raising campaign, look for a full on propaganda push. I think the sell off in bonds will be an unfortunate consequence of this decision as the 10 year yield will probably push towards 4% again with a vengeance. Keep in mind also, there are numerous opportunities for Jay Powell to say something inept during the press conference at 2:30 p.m., causing an equity and bond market rout.
But why is the Fed considering a pause now?
Think about the reasons given then ignore everything financial media is telling you. The reality is that any more rate increases starting with June of this year will be viewed by the Democrats as an attempt to weaken Joe Biden or whomever the Democrats nominate in 2024. The economy will see the impacts of any more rate increases between February to March of 2024. Rate increases at this time and in the next two months would intensify the depths of any recession which appears to be starting late in Q3 or early Q4 of this year. Despite popular belief pushed by so-called Wall Street experts, the Fed is now intertwined in this nation’s politics and they know a regime change could finally result in long overdue reforms of their kingdom.
Instead, the 1970’s style gambit of claiming to review the data will be the excuse for doing nothing. Hope is not a strategy, and after July look for the annualized data to tail off and core inflation to remain stuck above the 5.5% to 6.0% level as supply chain issues continue to frustrate the Fed’s efforts. Add in the first impacts of the “Inflation Reduction Act” slush fund piling into the national economic picture in July and August and inflation will remain stuck in a much higher than desired range, well above an annualized rate of 5%.
To quote from last year’s article about the Fed blunder in 2022:
Why do I have no faith in the Federal Reserve to do the right thing?
The answer remains the same:
Protect your ass ets accordingly.