Investor Expectations Versus Fed Intentions
Quite a few people are convinced that they know what the Fed will do next and why. How do they know? Is it really that obvious?
There are more questions to consider, too. Will the effects of continued actions or changes, for any reason, achieve the desired results? If they don't, what comes after that?
Let's talk about investor expectations first. The focus is now on a pause and possible pivot or change in direction. Most people are betting on a quarter-point hike at the next meeting with pauses after that and, eventually, a new cycle of lowering interest rates.
The reasoning behind these assumptions has to do with the fact that the Fed has accomplished its objective and needs to stop now before they cause more damage to the economy. That's what some are saying, anyway.
Has the Fed accomplished its objective?
Chair Powell has named inflation as the enemy and price stability as the goal. More specifically, he said...
"The Federal Open Market Committee's (FOMC) overarching focus right now is to bring inflation back down to our 2 percent goal." Fed Chair Jerome H. Powell August 26, 2022
Has that changed? Has the Fed accomplished its original goal of taming inflation and fostering price stability? Not according to the previous statement.
(By the way, wasn't the goal just a few years ago to get inflation UP to the "2 percent goal"? see (The Fed's 2% Inflation Target Is Pointless)
The Fed's real intention behind the plan to raise interest rates was to protect the U.S. dollar.
If that is the case, then it is fair to ask a previous question again: "Has the Fed accomplished its objective?
To wit: Is the dollar stronger or weaker as a result of the increase in interest rates?
QUESTIONS INVESTORS SHOULD BE ASKING
- If the Fed doesn't think the desired results have been achieved, or will be shortly, could/should they continue raising interest rates?
- Will a pivot do any good; or will the economic destruction continue and accelerate, anyway?
- If the Fed pivots and things get worse, what might it do then?
- Does any of this matter anymore?
THINGS EVERYONE NEEDS TO KNOW
Here is a list of things to keep in mind regarding Federal Reserve actions and intentions...
- Federal Reserve actions are reactionary, not preemptive.
- The Fed has played the interest rate game over and over since its inception and failed to prevent - and, even caused - the Great Depression and The Great Recession.
- The Federal Reserve is a private institution, a banker's bank.
- The Federal Reserve creates inflation intentionally on an ongoing basis for its own purposes (all banks create the money, lend the money and collect the interest)
- The Federal Reserve spends most of its time putting out fires associated with the bad effects of their own inflation.
Don't expect the Fed to act or react according to what seems logical to you. And don't assume that it's their job to safeguard your financial interests. Expect the unexpected.
This means more volatility, both up and down. If things get bad enough, you can expect additional regulations in conjunction with the U.S. government that inhibit or nullify your own financial and economic freedom. (see Fed Interest Rate Policy - 1929 And Now and Biggest Source Of Inflation Today-AUDIO)
Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN'T, AND WHO'S RESPONSIBLE FOR IT and ALL HAIL THE FED!