Investors Should Care About the Logic Behind the ‘Powell Pivot’

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There are all sorts of rationales why the Fed chief changed his stance on inflation. Why he did matters to investors, writes jmackin2

beyond narrow categories such as energy and used cars. It is real, after-inflation, interest rates that matter to the economy, and higher inflation with unchanged policy means lower real borrowing rates. The higher inflation gets without the Fed acting, the more stimulus monetary policy is providing.

With full employment almost achieved, it makes sense to refocus on inflation, and rates should start a steady rise. The futures market is priced for this approach: the most probable outcome is three 0.25 percentage point rate rises next year, according to CME Group calculations, with a one-in-four chance of reaching 1.25% or higher..

If the workforce is permanently smaller as a result of the pandemic, that is a nasty hit to supply that should change how the Fed reacts. The economy will generate more inflation for any given level of demand, so rates will need to be higher than they otherwise would be with the same level of economic growth, forever.

 

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jmackin2 How do most people not find it insane that the entire global currency system (and thereby the prices of *everything*) is centrally planned by one dude and his committee of 12 people. They lurch from one “policy error” to the next and people still believe they know what they’re..

jmackin2 Simple, he kept his job. Now he can make the unpopular decision. Time to get the Christmas bonuses. WalliesWhales, Politics and media (in that order) are really painting the saddest picture of who and what we are as a country and the hard work ppl most Americans are today.

jmackin2 Because the check cleared

jmackin2 cheemsinu OG dog memecoin bsc cheemsinu cheems CINU

jmackin2 no one takes any of this seriously until we (you) address the treason and attempted Coup of US govt by Trump, Meadows and team.

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