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Powell and the Fed Choose Stagflation

On Sunday night for the MacroEdge Ozone publication, I published a preview of today’s FOMC meeting where I outlined the choice for the Fed and Jay Powell was simple:

Either choose stagflation or to create a crisis.

Powell and Company chose stagflation because the crisis of the regional and community banks has already begun.

The best way to avoid the crisis according to central banks? Never acknowledge there is one until it is too late.

Keep in mind just this summary of events since the March CPI reading last month.

The Atlanta Sticky CPI, which is a more accurate measure of consumer impact than the Fed’s PCE, remains pegged well above 4%.

Meanwhile, in a reflection of dropping demand due to a weakening consumer, there was a massive build in oil storage in the United States resulting in prices cratering.

The build seems to indicate weakening demand which runs counter to Chair Powell’s statement about the economy being somewhat strong during his press conference today.

Also were comments from various restaurants highlighting a waning demand for overpriced food with smaller portions throughout the day.

And one could pull similar stories of demand drop offs, poor same store sales, price and wage increases, from McDonald’s or any number of chains headquartered in the US. Often the bubblevisions and their “analysts” deflect from reality by blaming it on overseas sales issues but the truth is that the American consumer is tapped out and a company can offer all the BNPL lattes they won’t that doesn’t make it a priority when the credit card bills come due.

Thus the other day when I pointed out that the American consumer in the middle and lower classes are unable to see any increase in disposable income due to inflation and the end of the fiscal largess.

With the FOMC’s statement today, it’s obvious that the Federal Reserve is not serious about fighting inflation nor about the lower echelons in society despite his statement about fighting the inflation the Fed helped create yet has no solution to containing it thus far. While there were no hints of a rate cut yet, the somewhat half dove idealism the Fed is attempting to implement will not help the poors and instead reduce economic growth while inflicting persistent embedded inflation.

The full FOMC statement is below:

May 01, 2024

Federal Reserve issues FOMC statement

For release at 2:00 p.m. EDT

Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion. The Committee will maintain the monthly redemption cap on agency debt and agency mortgage‑backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities. The Committee is strongly committed to returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; Loretta J. Mester; and Christopher J. Waller.

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