Discussion
Governor Waller - who speaks verbatim on behalf of Powell - went to great lengths yesterday to underscore the Fed’s goal of engineering a soft landing. He took hikes off the table, pending a continued decline in YoY Core PCE inflation; brushed off elevated stock prices being the result of loose FED policy; and reiterated the Fed wants to see the economy slow but not go off a cliff.
This is all BS. We know it. They know. Everyone knows it. We’re running a 5-10% fiscal deficit, commodities are breaking out, and supercore CPI inflation is reaccelerating. OF COURSE a second inflation wave is coming. But the Fed is gaslighting us because it is scared of market volatility, especially in an election year.
How do I know this? Because after Waller’s speech yesterday he did an interview with CNBC and the public version of the interview cuts off JUST as he says they’re unlikely to cut rates until “later this year, early next year.”
If that headline made its way across Bloomberg terminals, SPOOZ would’ve dropped 2% in a straight line. But you have to listen to the full interview on CNBC Exchange to hear him say it (circa minute 17:15 here).
We’re running the largest peacetime fiscal deficit in US history while at full employment. And the Fed is scared to tighten policy with inflation 50% above its target and moving higher. Mind the gaslight, please.