On a day where new Fed Chairman Jerome Powell testified to Congress, gold and oil were hit, but here is the big question.
Does The Fed Put Still Exist?
By Peter Boockvar, author of the Boock Report
February 27 (King World News) – Here is what Peter Boockvar wrote as the world awaits the next round of monetary madness: In his prepared text, Jay Powell in his first paragraph bottom lined his approach: “Together, Chair Yellen and I have worked to ensure a smooth leadership transition and provide for continuity in monetary policy.”…
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Boockvar continues: He spoke positively on the labor market and said this on wages: “Wages have continued to grow moderately, with a modest acceleration in some measures, although the extent of the pickup likely has been damped in part by the weak pace of productivity growth in recent years.”
Regarding Inflation
On inflation, he highlighted the below 2% PCE (not mentioning CPI) but said “We continue to view some of the shortfall in inflation last year as likely reflecting transitory influences that we do not expect will repeat; consistent with this view, the monthly readings were a little higher toward the end of the year than in earlier months.”
He then gave reason why inflation should continue to move higher: “fiscal policy is becoming more stimulative. In this environment, we anticipate that inflation on a 12-month basis will move up this year and stabilize around the FOMC’s 2 percent objective over the medium term. Wages should increase at a faster pace as well. The Committee views the near-term risks to the economic outlook as roughly balanced but will continue to monitor inflation developments closely.”
On how monetary policy will respond to the economic playing field he currently sees, “In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2 percent on a sustained basis.”
The Big Question
Bottom line, Jay Powell’s likely goal was to be as boring as possible in his testimony. He succeeded. They believe in continuity, they believe in not rocking the markets. The real test is when things change in this tightening cycle as there almost has never been a soft landing. How will Powell deal with the next recession? Will it be just the old playbook of zero rates and more QE? Will he let things play out on their own instead? Where is the strike price of the Fed put? Does it still exist?
ALSO RELEASED: James Turk – A War Is Raging In The Silver Market CLICK HERE TO READ.
***Speaking of gold, KWN has just released the extraordinary audio interview with Gerald Celente discussing the action in the gold, silver and major markets as well as what he is planning to do with his own money in the gold market and much more and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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