Excerpts from a TGIF 2 Minutes written 11 1/2 months ago follow.
Today, the US Fed is not finished raising interest rates.
Inflation is still around for multiple reasons.
Note the emphasized comments in bold.
Wind back to October 2022: A question that may be on a number of people’s minds was, “How long will it take to tame inflation?” Unfortunately, there was very little telling. Part of the reason is that inflation is always part of a complicated economy. Predictions about the timing of inflation (and hard-landing/soft-landing) are nearly impossible.
To add to the confusion, emotions – specifically people’s expectations of inflation – are part of what keeps inflation around. In this inflationary cycle (as of October 2022), inflation had already stuck around longer than at almost any time in US history; long enough to increase people’s expectations that inflation would not go away quickly. The US Fed had stated one of its original intentions was to lower consumers’ inflationary expectations. But the Fed may have missed that boat late in 2021 due to forces out of its control, namely, the pandemic aftermath. Note that today in late September 2023 inflation is still running strong.
Believe it or not, the following is taken from October 2022 (with a couple of updates). Inflation almost always takes longer to tame than we think.
A question that may be on a number of people’s minds is: How long will it take to tame inflation? Unfortunately, there is very little telling how long it will take the US Federal Reserve, or any other entity or force, to tame inflation, especially in the short-term. Part of the reason is because inflation is always part of a complicated economy – with diverse people, businesses and governmental/fiscal forces in action. Timing (and hard-landing/soft-landing) predictions about inflation are nearly impossible.
A question that may be on a number of people’s minds is: How long will it take to tame inflation? Unfortunately, there is very little telling how long it will take the US Federal Reserve, or any other entity or force, to tame inflation especially with respect to the short-term. Part of the reason is because inflation is always part of a complicated economy – an economy with diverse people, businesses, and governmental/fiscal forces in action. Making timing (and hard landing/soft-landing) predictions about inflation is nearly impossible.
To add to the confusion, believe it or not emotions – specifically people’s expectations of inflation – are part of what keeps inflation around. In this inflationary cycle, inflation has stuck around longer than at almost any time in US history; long enough to increase people’s expectations that inflation will not go away quickly. The US Fed had stated one of its original intentions was to lower consumers’ inflationary expectations (but the Fed may have missed this boat due to forces out of its control, namely, the pandemic aftermath).
Today’s TGIF 2 Minutes was delayed to reflect a speech given earlier today in Jackson Hole, WY by US Federal Reserve Chair, Jerome Powell.
Earlier today (Friday) US Federal Reserve Chairman Jerome Powell spoke in a widely anticipated speech at an annual meeting of the Kansas City Federal Reserve Bank. The market and investing worlds were looking for guidance from the Fed Chair regarding interest rates and future inflation. Part of the reason for the speech being so closely watched goes back to a former Fed Chair. For those old enough to remember, in December 1996 Alan Greenspan made a now famous speech that rocked the markets when he coined the term, “irrational exuberance.” Then Fed Chairman Greenspan commented,
“How do we know when irrational exuberance has unduly escalated asset values…?” Greenspan went on, “We should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy.”*
As pockets of US East Coasters sit working and waiting out the nearly inevitable temporary loss of power due to Hurricane Dorian, I cannot help but partially relate this “wait” to a comment made recently by one of the Federal Reserve Bank Presidents. Back in August Robert Kaplan said the following about US trade policy and the markets,
“When you have this amount of uncertainty and this frequency of changes, my reaction as a businessperson is not to speed up – it’s actually a little bit to slow down the cadence of it and maybe take a little bit more time.”* Continue reading “Waiting Out the Storm (Not Dorian)”
How many of these items have you been bombarded about lately?
Inverted yield curve
Negative bond yields
Trade and Currency wars
“Fed Chairman Powell lacks clarity in his Q&A sessions” (talk about the ultimate throw under the bus)
A recession may or may not be coming soon. Recessions have been part of the US and global economies since the dawn of recording market data which dates to the 1920’s (with recessions dating back to the 1800’s). Please see the accompanying chart that summarizes various scary events since 1970, several of which led to nasty recessions. Remember the Arab oil embargo?? The Dotcom bust?? Please also note the way the US stock market – which is based on a free market economy and the consumer – has recovered over time. Continue reading “Is a Recession Coming?”
“TGIF 2 Minutes” was never meant to simply report current events. Rather, my intent is to highlight topics in personal finance – or a current topic – that affects your financial life and decision-making. BUT (there is always a “but”) certain pieces of news affect our mindset – both positively and negatively – and if I can comment on how to avoid letting the news sway you too far either way financially-speaking, then I believe it worth commenting!
ECONOMIC TIMES ARE GOOD! This week the revised U.S. GDP report (the key measure of economic growth) revealed a strong, strong US economy. There is a reason I am mentioning this news as it relates to our mindset for making all sorts of major spending and savings decisions – decisions for us, our families and businesses in the short-term and longer-term.
As we sip our coffee and start our weekends or workdays there is a group of economists, Federal Reserve officials and finance ministers from the U.S. and around the world gathering in Jackson Hole, Wyoming for three days. Why is this worth mentioning?
We have already had more volatility in the first three months of 2018 than we saw in ALL of 2017 and most of 2016 combined. Snow? On the first day of Spring! Driverless cars on the road… What’s next?
The snow wasn’t the worst part of it. Facebook stumbled this week amidst legitimate concerns of how honest it is with protecting its user data. This is not the first time Facebook has faced the issue of deceiving its users: back in 2012 under a decree with the FTC Facebook had to agree to get user consent in order to share users’ personal data with others.