Did The Fed Just Hint At Monster Inflation?

Secular Investor's picture

A pedestrian passes the Federal Reserve Building in Washington

We won’t bore you with yet another article about the recent rate hike by the Federal Reserve. This move was widely expected, as the Fed members had been hinting this would happen for several months now. Additionally, the new ‘hints’ about an additional two rate hikes later this year also didn’t surprise the market as we believe this was already priced in. The slight hike in the Federal Funds Rate estimate for 2019 to 3% (from 2.9%) didn’t see to worry the markets as the indices were all sent higher on the back of the FOMC meeting.

The ‘dot plot’ also caught our attention. Even though Yellen specifically announced the Fed was aiming for at least three rate hikes, the dot plot chart shows there are three members who are still expecting a maximum of two rate hikes. Surprising, considering the most recent interest rate decision was almost unanimous.

Fed 1

Source: Bloomberg

It made us scratch our heads as there didn’t seem to be any logical explanation at all, but then the Royal Bank of Canada came up with a theory which makes a lot of sense. Fed member Lockhart (Fed Atlanta- resigned at the end of February and could not possibly have submitted a new rate hike expectation. According to RBC, this could mean his (temporary?) replacement just submitted the same position as the previous time the Fed Atlanta was indicating, before Bostic was appointed as the new President and CEO of Fed Atlanta.

A logical explanation, but this wasn’t the only ‘interesting’ thing after the FOMC meeting. In the very first paragraph after officially announcing the rate hike, we could read this:

“ The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal.”

The logical explanation here would be the interpretation the Fed wouldn’t allow the inflation rate to run at a higher percentage than 2% for a prolonged period of time, but the statement could also be read as the Fed explicity warning of a much higher inflation rate than originally anticipated. We know the market has always been prone to overshooting, either on the positive or negative side of the equation. We don’t think we have ever heard the Fed talk about ‘symmetric’ inflation, but as the FOMC members are leaking more intel than the Exson Valdez spilled oil, this position will undoubtedly be clarified in a ‘coincidental’ interview or public speech.

Fed 2

Source: Federal Reserve

Looking at the expectations of the Fed board members, they are practically still confirming ‘money’ is losing its value pretty fast. Whilst the median expected inflation rate is pretty close to 2%, an additional two-step rate hike would still put the ‘real’ interest rate below zero. And that’s what counts; your money is worth less day after day.

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JailBanksters's picture

There are two words the Club FED just can't say

DE-Flation and HYPER-Inflation

They probably hate Deflation the most, which is odd because

the Banks are always trying to force things to be cheaper in the Future, as long as the Public pays more.

 

 

 

joego1's picture

A few trillion clown bucks here a few trillion clown bucks there and pretty soon you have some real inflation. Who would have thunk it?

RedBaron616's picture

Of course, any organization that puts out a "Gold & Silver Report" is going to see the Bogeyman, Inflation, around every corner. And like a broken clock, they are right once in a while, but not because they have any particular noteworthy insight.

PUNE's picture

more crap.  i mean really. 

Sudden Debt's picture

Way to late. Europe is already suffering high inflation and by the summer it will get pretty bad.

America is just now catching up and it also will get 20 to 30% inflation on basics and import.

So ask yourself this: Can you save 1/3 of your salary? If yes, you'll get by.

If no, you'll need to cut back and it won't be a nice 3 years to follow.

Exota's picture

cut all the crap , just watch 10&30Y charts ,how things evolve

The Fed is behind the curve

Solio's picture

the fed is behind everything

bardot63's picture

If the Fed wants instant inflation, it should just take its heel off the throat of the gold price.  

Synoia's picture

Inflation is eithreer oil price cost pushed (the '70s) or demand pull.

I don't see another tripling of the price of oil to repeat 1974 again.

With stagnent or declining wages and Obamacare costing US consumers the price of a mortgage, demand is crushed.

I don't see union based inflation indexed contract causeing a rise in worker disposable income like the '70s.

 

What inflation?

Consuelo's picture

 

 

 That job has been left for a foreign entity/s to do at their leisure - or impending foreign policy crisis, whichever comes first.

GreatUncle's picture

You got a mountain of debt in the FIAT economy and you use the Keynesian method.

Please reply on any method preserving the two because that is what those like GS are refusing to give up, period, no matter how much you holler and scream.

The first thing they have to do is try to stabilise debt and that means inflate as much as is needed and no the ordinary people can suffer and die on this because they are the "only" entitled ones.

Really simple when you look at it and if the value of "money" vanishes then they have no power so they will CTRL-P and inflate as much as they need just ordinary people are going to be fucked over.

That's why snowflakes and millenials are dumb, they believe ... they are something special, nope worn, same as all the other serfs.

Lonesome Crow's picture

"We won’t bore you with yet another article about the recent rate hike by the Federal Reserve."

Silver Savior's picture

I don't know why they feel the need to create inflation . There is more than enough already and Joe six pack knows about it or should. But it's ok inflate the worthless dollar away. I am getting sick of it.

moneybots's picture

"We don’t think we have ever heard the Fed talk about ‘symmetric’ inflation..."

 

That's because it is a made up term. A symmetrical triangle has two equal sides. One rising, one falling. The FED is afraid of the falling side of symmetry.

 

 

Honest Sam's picture

There can be no monster inflation without a significant increase in wages, salaries, and interest income.  

Who thinks that the 1%ers are going to agree to that??

And for the record:  2.5% in NOT an awesome interest rate on your CDs, savings, in spite of what the advertising for your bank says. 

 

 

moneybots's picture

"This move was widely expected, as the Fed members had been hinting this would happen for several months now"

 

No it wasn't. Every meeting last year was "live" according to FED mouthpieces, yet there was only one rate hike in 2016. It was only at the last minute that the March 2017 rate hike odds spiked up to 100%, from under 50.

Berspankme's picture

Fed is purely political. Make economy collapse and blame trump/right. Make em beg for a demoncrat

NidStyles's picture

Beg for a Jew approved globalist, doesn't matter which party.

 

The NeoCohens or a completely looney leftist like Hillary. They both work for the same lobbiests.

drdolittle's picture

They will hike until the economy collapses. Typically six months behing the effect of the hike. Then, "look morons, Trump ruined the economy. Let's never have an evil white man lead our diverse country again". Get ready to be bent over. 

conraddobler's picture

I really think this is one of their core goals.

Probably why Trump was chosen as a sort of sacrificial whipping post that on the surface embodies the last vestiges of real oppositon but in reality probably is totally under their control.

It's a frame job in other words.

DownWithYogaPants's picture

This article is a gold shilling?

Before election when it looked like Shillary would win:  FedRes says "maybe we can let the economy run hot" and likewise only 1 rate hike in 10 years for president protected class

After Trump surprises and wins: Oh my we need to raise rates

These silver and gold guys have some legitimate points but I am inclined to believe they are lying when they go this far.

Goldennutz's picture

He wasn't called The Magic Negro for nothing.

Doña K's picture

In some countries newspapers are not allowed to lie, so they use this questionmark at the end of the premise. And yes the answer to all these are NO! all the time.

 

lasvegaspersona's picture

Newspapers (what are those again...?) and media in general don't lie these days. We get 2 sets of 'news' one for the right and another for the left. The idea of objectivity is long gone.

The left cannot bear good things about Trump. the right simply has been lied to for too long. there is no point in trying to convince anyone of anything anymore.

auricle's picture

“ The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal.”

 

Asset in flation is through the roof. PCE products, not so much.

Get to work Janet. 

 

Consuelo's picture

 

 

But-but-but...

 

Those things are 'transitory'...  

hoos bin pharteen's picture

Exactly. There has been tremendous inflation in things necessary for living, deflation elsewhere. But again, the Fed is the cause by hiding inflation behind hedonics, etc. in its official stats, and policies it derived from those same deceptive stats.