Today’s podcast goes over the whirlwind two-day congressional testimonial Jay Powell had while talking about how the Federal Reserve will fight inflation in the future. We also went over various topics and answered some followers’ questions given to Sarah and me.
My issue with the Federal Reserve is that they seem to be all over the map on what they’re trying to do. Their premise was to track the 3, 6, and 12-month core PCE growth rate and super front load the rate hikes to get above that level. Then they will let it hold, so they don’t have to cut rates faster than they want. Over time the growth rate of core PCE should cool down, as their forecast shows. Now they seem nervous, flustered about what is happening. If they want to say they want to be more restrive than before, then say the Fed funds rate will be 1.50% to 2% above the 12-month core PCE growth rate, telling the markets they have more rate hikes to do. However, they didn’t; they’re not sure of themselves here, which defeats the purpose of hiking rates so much, so fast, and then letting the lag impact of rate hikes work into the economy. I don’t believe I would take any of them on my team if they get flustered so quickly off one or two data lines. The goal is higher for longer.
Raising rates so fast was the higher for longer premise, once they’re to their neautral rate which is why I am not a Fed pivot person until jobless claims break over 323,000 on the four week average.
Pivot means the language changes with the Fed first, not rate cuts; the bond market will get ahead of the Fed when this happens. Just disappointed with such a shift in 24 hours from Chairmen Powell, when he tried to backtrack what he said the first day on the 2nd day of talking.
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Logan Mohtashami is a Lead Analyst for Housing Wire, a financial writer, and a blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami, now retired, spends his days and nights looking at charts and nothing else