E TalkMarkets Tuesday Talk: FAIT Awaits

Good morning and a good Tuesday to you. Markets are green at the open though futures had been fluctuating flat to up overnight, so maybe a sideways day as the markets await the FOMC meeting tomorrow. Monday proved to be a good start to the week with the Dow up 1.18%, the S&P 500 1.27% and the Nasdaq 1.87%.

Chart: The New York Times

Asian Markets closed mixed today with the Nikkei down about .50% and both the Shanghai Composite and Hang Seng up by about a similar amount. European markets are trending upwards today. As I write the Dow is up at 28,155, the S&P 500 at 3,412 and the Nasdaq Composite is at 11,175. Go green.

Flexible Average Inflation Targeting (How's that for a mouthful?), is the Fed's new tool for managing inflation and was first unveiled by Fed chairman Jerome Powell at last month's virtual Jackson Hole Symposium. As the Fed Chair noted then, the change in policy is to allow for inflation to crest above the bank's target inflation rate of 2% but still remain at an average of 2% over time. Since the Fed announced it's 2% inflation rate target in 2012, inflation has only reached that level once in 2018 and has otherwise averaged 1.6%

TalkMarkets contributor Mircea Vasiu of Vantage Point Trading, writing in FAIT – The Focus On Tomorrow’s Fed Meeting makes the following observations ahead of tomorrow's Federal Open Market Committee (FOMC) meeting:

  • "The Fed has a hard time explaining to markets why higher inflation is good for an economy. The market expects more details tomorrow about FAIT and what exactly the Fed’s plan is moving forward."
  • "Many market participants already believe that the Fed is cornered, trapped in continuous accommodation. If that is the case, higher inflation is unlikely to materialize anytime soon unless it becomes self-fulfilling."
  • " If the population and the market participants believe the Fed is able to create inflation, the Fed will have an easy time reaching its new mandate. So far, stocks are up, Bitcoin is up, gold is up, silver is up, dollar is down. Judging by this metric, inflation is coming."
  • "Any hint by the Fed tomorrow that it eases the monetary policy further will send the USD much lower."
1 2 3 4
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
William K. 4 days ago Member's comment

Evidently I define inflation a bit differently. I see inflation as the price of the things that I NEED TO BUY, such as food and power, rising much faster than the actual value. That is different than rising prices on durable assets. That inflation constitutes a direct attack on my savings and wealth. That is the inflation that the fed is constantly pushing so as to benefit those who are not me, at the expense of those who are in a similar position to mine. That includes most folks who are not actively in the stock market or banking business. I was still in high school when this reality became clear to me, and so it is not like the fed has just come up with something new.

Discovering that a given course of action does not work should not take 60 years, unless one is attempting to train Banyon trees. Thus the only possible conclusion is that the fed has never had the benefit to the majority of the population as any part of it's goals.