Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fed Chairman Powell Spooks the Market by Signaling 50 Point Rate Hike

Stock-Markets / Financial Markets 2022 Apr 24, 2022 - 02:08 PM GMT

By: MoneyMetals

Stock-Markets

Tough talk from the Fed roiled markets this past week, with stocks as well as precious metals getting hit.

On Thursday, Federal Reserve chairman Jerome Powell said the central bank intends to pursue a more rapid pace of interest rate increases. He indicated that a 50-basis point hike in May is likely. 
Jerome Powell: We really are committed to using our tools to get 2% inflation back and I think if you look at, for example, if you look at the last tightening cycle, which was a two-year string of 25 basis point hikes from 2004 to 2006, inflation was a little over 3%. So, inflation's much higher now and our policy rate is still more accommodating than it was then. So, it is appropriate, in my view, to be moving a little more quickly. And I also think there's something in the idea of front-end loading, whatever accommodation one thinks is appropriate. So, that does point in the direction of 50 basis points being on the table, certainly. We make these decisions at the meeting and we'll make them meeting by meeting, but I would say that 50 basis points will be on the table for the May meeting.


Fed officials are vowing to get their benchmark rate up to a “neutral” level by the end of the year. Futures traders are currently anticipating a 2.75% Fed funds rate. 

Whether the Fed will actually get there is questionable. A downturn in the economy or a panic in the stock market would likely halt the Fed’s rate hiking campaign dead in its tracks.

Another question is whether the rate hikes that do come will be enough to blunt inflation pressures. The latest Consumer Price Index report shows price levels rising at over 8% annually. Even if inflation cools off in the months ahead, it may not get down to anywhere near the Fed’s 2% target.

Negative real interest rates are likely to persist regardless of how many nominal hikes central planners push through.

That means savers who are hoping for money market yields to catch up with the inflation rate will be disappointed. The need to seek alternative vehicles for saving and preserving wealth is as pressing now as ever.

The worst of the inflation wave could be yet to come. 

There are signs that food costs will continue to accelerate higher and a very real possibility of widespread global food shortages. The Russia-Ukraine war will severely diminish farm output in the region. And as Russia is a major producer of fertilizer ingredients, Western sanctions are constricting global supply chains to farmers.

To make matters worse, rail transportation backups in the U.S. are limiting delivery of fertilizer to farmers. Union Pacific Railroad announced this week that it will reduce service to fertilizer suppliers by 20%. Grain capacity is also being reduced.

This development couldn’t have come at a worse time for farmers heading into peak planting season.

What comes next could be social unrest. Inflation uprisings are already occurring in Third World countries.

At the very least, an uprising at the ballot box this November seems certain to occur. President Joe Biden’s approval ratings are low and going lower every month as inflation frustrations mount. 

Voters shouldn’t expect any serious political solutions to the current predicament.  Yes, there are some things a new Congress could do to push back against the Biden spending agenda and open up domestic energy production. 

But regardless of which party controls Congress, the cycle of government spending and borrowing will persist. And an unaccountable Federal Reserve will continue to enable it all by expanding the currency supply.

Despite their tough talk on tightening, central bankers always bend to pressure from Wall Street whenever markets come undone.

Fiscal and monetary soundness won’t return to Washington any time soon. But individual households can still opt to put themselves on a sound money standard. 

It starts by doing the opposite of what the political class has been doing over the past few decades. Since abandoning gold backing for the currency, spending and borrowing have exploded and the value of the U.S. dollar has plummeted.  That is the root of the current inflation problem.

Households that spend and borrow recklessly will grow poorer over time even as they enjoy the temporary high of new cash infusions from creditors.  Those who do what seems to be the responsible thing by saving can also grow poorer over time as any savings denominated in Federal Reserve notes lose value. 

There may be a place for chasing growth opportunities when they present themselves in equities and other markets. But a solid foundation of cash reserves should come first.

The best form of cash isn’t issued by any government. It’s dug from the earth by miners and refined into sound money in the form of gold and silver bullion.

By Mike Gleason

MoneyMetals.com

Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2022 Mike Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in