By Graham Summers, MBA
The financial media is pushing the narrative that the Fed is about to “pivot” in terms of inflation.
Put simply, the argument is that inflation has peaked, so the Fed won’t need to raise rates by 0.5% past the month of September, at which point it will either PAUSE raising rates or continue to raise them albeit at a slower pace of 0.25% per raise.
And it’s total nonsense.
Inflation is now over 8%. The Fed funds rate is at 1%. Even if the Fed hikes rates to 3% by September (it won’t), it’s still NOWHERE near stopping inflation.
The people pushing this narrative in the media are being fed stories by fund managers who were desperate to game performance last month. Most funds had horrific months in May. And since they need to report their results at month end, they needed a reason to justify why stocks suddenly exploded higher for three days right at the end of the month.
Enter the “Fed pivot” narrative.
It’s total nonsense… but if spouting nonsense was a dealbreaker in this industry, most of the financial media would be out of business.
Let’s dive into this a bit more.
Inflation is over 8%.
The Fed has YET to shrink its balance sheet at all. As I write this, the balance sheet is within spitting distance of $9 TRILLION.
Meanwhile, the Fed funds rate is at 1%.
Again, the notion that the Fed has done enough to take it easy regarding inflation is 100% nonsense.
History has shown us, quite clearly, that once inflation is in the financial system, the Fed CANNOT stop it with half measures.
This means that in order for the Fed to truly bring inflation to task… it will need to get AGGRESSIVE.
Bear in mind that the meager efforts the Fed has made thus has already caused stocks to do this…
What happens when the Fed is forced to raise rates to FIVE percent or more. What happens when it tries to shrink its nine TRILLION dollar balance sheet by $1+ trillion.
You get the idea.
The Mother of All Collapses is coming!
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