Fed Recommits To Misleading The Public About Inflation

Did the Federal Reserve just usher in the next phase of the U.S. dollar’s decline?

On Wednesday, the central bank recommitted to leaving its benchmark interest rate near zero for the foreseeable future.

Fed officials also vowed to keep pumping cash into financial markets.

Following Fed Chairman Jerome Powell’s remarks, the wavering U.S. Dollar Index turned down – hitting a fresh new low for the year. Gold gained modestly on the day while silver got a bigger boost to close solidly above $25/oz, promptly heading to $26/oz the day following.

Precious metals markets have been basing out over the past several weeks. They are struggling to attract safe-haven demand amid record runs in stocks and Bitcoin.

How sustainable the bull market in equities will be heading into 2021 remains to be seen. Investors are pricing in a strong vaccine-driven economic recovery aided by monetary and fiscal stimulus – all with little to no inflation consequence.

The Fed vowed in its policy statement yesterday to continue with $120 billion in monthly purchases of U.S. Treasuries and government-backed securities “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.”

Policymakers’ reference to “price stability goals” is a farce. Their actual goals entail pushing price levels up at a considerably higher pace than has been seen in recent years.

The average American knows intuitively from their own experiences that inflation is a bigger problem than officials acknowledge. “Price stability” is Fedspeak for jacking up healthcare, housing, and other costs of living.

The recent NPR article “Paycheck-To-Paycheck Nation: Why Even Americans With Higher Income Struggle with Bills” highlights some of the financial struggles facing the middle class.

The accompanying graph shows just how much average wages have lagged behind major household expenses:

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