Juggling Dynamite

Helpful overview and charts from Nick in this segment.

Jerome Powell and the Federal Reserve just pivoted and are no longer increasing interest rates. With the Fed FOMC deciding to skip a rate hike at their June 2023 meeting.

This was the first meeting in 15 months where the Fed didn’t hike. The reason the Fed did this is that inflation is now going down, with the BLS reporting 4.0% YoY CPI growth in May 2023. Lower inflation levels give the Fed an excuse to pause rate hikes. Here is a direct video link.

Danielle was a guest with Jim Goddard on Talk Digitial Network, talking about recent developments in the world economy and markets. You can listen to an audio clip of the segment here.

A world of bullish commentators asserts that Fed pauses are positive, even though the worst economic and stock market downturns have always come after the Federal Reserve stops tightening.

After ten consecutive rate increases and the sharpest rate of change since 1980–yesterday, Fed Chair Powell announced a “skip” with ongoing quantitative tightening (QT) and possibly further hikes in 2023. When asked about rate cuts, Powell said they would likely be “a couple of years out.”

Forecasts are hard and it’s worth remembering that historically, the Fed’s been wrong on its rate predictions 2/3rds of the time. But even if no further hikes happen, the rate “skip” and ongoing QT is not bullish; not easing for two years would be the harshest monetary medicine in decades.

Longer-term, an extended cleansing out of speculative behaviours, zombie debtors and irrationally high asset prices will set up a secular period of rising productivity and prosperity, unlike anything we have seen since 1982. In the meantime, however, the pain is set to be plentiful as increasing unemployment and insolvency test the Fed’s resolve. The discussion in the clips below is worth a listen.

Danielle DiMartino Booth, CEO and Chief Strategist at QI Research, returns to Forward Guidance to share her views on the Federal Reserve’s decision to pause its hiking of interest rates. Filmed on June 14, 2023, after Fed Chair Jay Powell’s press conference for the June meeting of the Federal Open Market Committee (FOMC). Here is a direct video link.

Fed: GDP for 2023 is at 1%, Projecting 2 Additional Rate Hikes, DiMartino Booth Joins #charlespayne of #foxbusiness. Here is a direct video link.