I Was Wrong: The Fed Holds

Powell wants to cut, so what’s he waiting for? June 13, 2024 [WEBSITE]( | [UNSUBSCRIBE]( I Was Wrong: The Fed Holds SEAN RING Dear Reader, Every night, I dream that a crowd will carry me on their shoulders and think of me as a genius. And then my alarm clock goes off. Last night, at 8 pm my time (2 pm Eastern Time), Chairman Powell and his FOMC made a significant decision. They chose to maintain the current interest rates, leaving them unchanged. As you may recall, I had previously predicted a 0.25% interest rate cut from the Fed this month. My reasoning was that with the election five months away, Powell could use this as a politically deniable move. Alas, he didn’t do that. The Federal Funds Rate range remains between 5.25% and 5.50%. Why didn’t he bring the inevitable forward? Let’s get into it. Yesterday’s CPI After drinking my coffee and writing yesterday’s Rude, I settled in for lunch. Then, I watched for the highly anticipated CPI number. Everything came in soft: Indicator Time Period Actual Expected Previous CPI May 0.0% 0.1% 0.3% CPI Year Over Year 3.3% 3.4% 3.4% Core CPI May 0.2% 0.2% 0.3% Core CPI Year Over Year 3.4% 3.5% 3.6% Even the core CPI came in below what was anticipated. This was a positive outcome for me. This set the stage for that cheeky cut of 25 basis points, or 0.25%. My Wrap Up from last month’s CPI column read (bolds mine): Tomorrow is a big day for domestic asset and mortgage markets and central banks at home and abroad. I suspect inflation will be hot, but that’s not a prediction. No one knows what the BLS statisticians will concoct this month. But if I’m correct, the Fed will probably hold in June and cut in July, depending on future inflation data. If I’m wrong and inflation is tame, the Fed will surely waste no time to cut. Remember, Jay Powell doesn’t want to work for The Donald again, but he can’t make it look political. The further he cuts from the election, the better for him. If I were Powell, I’d pray for a tame number. Or I’d pick up the phone to the BLS and put a thumb on the scale. I thought The Powers That Be cooked the books. Well, it looks like Jim Rickards was right about one crucial thing (among many): the Fed wouldn’t do anything until it saw three months of inflation coming in below expectations. This is only the second month that’s happened. But there’s another problem. [June 13th = Doomsday For America?]( This Thursday, June 13th, President Joe Biden is scheduled to meet with heads of state from around the world… And if they make the announcement my research is showing me… [Biden’s next corrupt move could be the final death blow to the value of your hard-earned dollar,]( making your cash worthless. "Our currency is crashing and will soon no longer be the world standard, which will be our greatest defeat in 200 Years,". [Click here now and watch my latest market briefing while you still have time.]( [Click Here To Learn More]( Powell Doesn’t Believe Biden Wow. Just wow. Edward Snowden made a fine point about Zero Hedge’s tweet from Powell. Credit: [@Snowden]( And here I thought Powell was onside with Biden. However, Powell thinks Biden is cooking the employment books (and Biden or his peeps undoubtedly are), so Powell no longer believes that data. I mean, we know the employment numbers are horsefeathers. And Joe Biden knows the employment numbers are horsefeathers. We know that Joe Biden knows that… Oh, never mind! The point is that it’s incredible that Powell doesn’t want to base monetary policy on his president’s employment numbers. Meeting Highlights Inflation remains above the Fed's target, with recent data showing almost zero progress toward achieving the desired 2% inflation rate. Core PCE inflation is expected to be slightly higher at 2.7% for 2024. Despite some positive signs, such as solid job gains - which Powell is skeptical of - and resilient economic activity, the overall economic outlook remains uncertain. The FOMC's latest Summary of Economic Projections (SEP) adjusted the expected GDP growth for 2024 to 2.1%, up from a previous forecast of 1.4%. The unemployment rate is projected to rise slightly to 4.1% by the end of the year. While the current stance is to maintain the rate, the FOMC's projections include the possibility of one rate cut by the end of 2024. However, this cut is contingent on continued positive inflation data and economic stability. According to [Bloomberg]( Fed officials see four rate cuts in 2025. The Fed announced a slowdown in its Quantitative Tightening (QT) program, reducing the monthly cap on U.S. Treasury securities redemptions from $60 billion to $25 billion while maintaining the current caps for agency debt and mortgage-backed securities. In essence, the Fed is slowing down the shrinking of its balance sheet. This is “loosening the tightening” and, hence, inflationary. Hawkish Message My friend and colleague Dan Amoss posted this from Bloomberg: The yellow dots (The Dot Plot) show where members of the FOMC see rates at a given time. Dan wrote in our Slack channel, “The green line (median dot) over the purple line (OIS, the futures market pricing of fed funds rate) is the hawkish message from the FOMC to the market.” Like Dan, I’m looking forward to when the central bank will be a minor player in the free market. Wrap Up I’m sorry I wasn’t right on the timing of the cut, but the cut is coming. I wouldn’t be surprised if they cut in July, but now it looks more like an autumn cut than a summer cut. If the cut is inevitable, Powell should get on with it. But that’s not his way. Powell's cautious approach to monetary policy, prioritizing stable inflation and employment, is a significant factor in the current economic landscape. This careful balance is crucial for the stability of Wall Street and the overall economy. They say he who hesitates is lost. Let’s hope Powell doesn’t get lost in the weeds of his data. All the best, Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( Rate this email Like Dislike Thanks for rating this content! Looks like something went wrong. Please try to rate again. In Case You Missed It… Jim Rickards’ Banker Predicts Inflation Wrecks Democrats SEAN RING Speaking with Zach Scheidt is always a pleasure. His ability to explain and articulate his views is second to none. He’s also one of those people who genuinely cares not only about his subscribers but John Q. Public, who’s suffering - the correct verb - all this inflation and taxation. I had the chance to sit with Zach at the Watergate Hotel in Washington D.C. three weeks ago - we kept that quiet, didn’t we? - and he was as giving as ever. I’ve summarized the key points below, but I’d love for you to go to our [Paradigm Press YouTube]( channel and watch the entire chat. Just click that link, and away you go. Set the video speed to 1.5x, so you’ll be done in under 14 minutes and lose none of the key points. Here’s my summary of Zach’s big themes. Middle America Rampant inflation, characterized by a sustained increase in the general price level of goods and services in an economy over time, will significantly impact the economy, families, and investors. This will lead to political instability and a shift in support toward Trump. Inflation harms the average family in Middle America and impacts the economy and investors differently. The Democrat Party's promises to help the working class haven’t worked out at all, and rampant inflation will further harm Middle America. Inflation is a major concern affecting the economy and investors, with profit potential for investors and negative impacts for consumers and families. High inflation puts financial strain on predominantly middle- and lower-income families, who struggle to afford the necessities even if the inflation rate decreases. Prices are rising rapidly, putting families under financial strain. Even if the inflation rate were to decline, it would still be difficult for them to afford food, shelter, and gas. High inflation levels are outpacing wage increases, putting families under financial strain. Inflation Inflation affects middle- and lower-income families more than affluent families. Those with assets, like homes and stock portfolios, offset the effects of inflation. Those without assets are hit hard as each dollar buys less and less. Inflation benefits the government by reducing the impact of trillions of dollars in debt, creating a perverse incentive to allow inflation to keep rising. Central bankers set 2% inflation targets because they fear a deflationary spiral, which occurs when prices go down due to weak economic activity, leading to ever-lower prices for goods and services. Low demand for goods and services, caused by a lack of money from job losses or pay cuts, will lead to deflation, which Keynesian economists think is bad. But I bet some young people would love to see house prices drop! [Download This New Survival Guide Today!]( There is a “Crisis Survival Guide” that is available to all Rude Awakening readers today. This short 54-page document has everything you need to know to protect yourself and your family in times of crisis. Things like what foods to stock up on now, staying safe during periods of rioting and looting and more. Inside it breaks down all of the coming threats you face and how to prepare. [>> To see how to download your copy, click here now](. [Click Here To Learn More]( Trump in November Here’s where I disagree with Zach: He says the Federal Reserve won't cut interest rates before the election. Jerome Powell is unlikely to cut before the election because of the lack of progress on inflation and the Fed's desire to avoid appearing political. This is part of the reason Zach believes Trump will win in November: the impact of inflation on lower-income families. Zach says economic mismanagement may lead to working-class voters shifting towards Trump, causing political instability and a loss of support for the Democrats. Biden’s Executive and Congress’ Legislative branches have mismanaged the economy, causing hardship for the working class, and political instability in Washington will likely lead to the Democrats losing support. Inflation affects the economy and voter base, with working-class and lower-income voters shifting toward Trump. At the same time, the academic elite will likely remain with Biden regardless of economic conditions. Biden's main base won’t remain loyal because of poor economic conditions. So, what’s a good way to take advantage of this? Shiny Stuff and Base… Gold, silver, and copper are suitable investments due to rising inflation. Copper, in high demand for electric vehicles and infrastructure, presents a promising investment opportunity. This is a good time for copper investments, especially in stocks like Freeport McMoran (FCX), which boasts efficient production and benefits from the increasing prices of copper, gold, and silver. Copper is in high demand for industrial production, especially for electric vehicles and infrastructure projects. Due to government stimulus plans, it could continue to trade higher in a weak economy, making it an excellent time to own copper investments. Freeport is a good stock known for copper production, but it also mines silver and gold as byproducts, which helps cover operating costs and increases profits. Due to the increasing prices of copper, gold, and silver, Freeport's production is efficient and valuable, making the company's stock worth more even if it doesn't generate more profit. Ensuring a diversified portfolio with commodity investments is a prudent strategy to mitigate risks from inflation and interest rate changes. Zach’s Latest Read Zach’s current read, All Weather Trader, is a valuable resource for understanding these themes. The book discusses the importance of diversifying your investment portfolio, which involves spreading your investments across different assets and strategies to reduce risk. This strategy can help generate income regardless of market conditions. Investing in commodity markets and diversifying your portfolio can help offset risks and potential losses in dividend stocks due to inflation and interest rate changes. Wrap Up Zach predicts that rampant inflation will significantly impact the Democrats, a critical investor insight. It’s always a pleasure to hear Zach’s views, and I hope you enjoy [the interview](. Remember, if you watch it at 1.5x speed, you’ll be done in under 14 minutes and lose none of the key points. Have a great day! All the best, Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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