Fed Pivot Is Nearing
The Fed pivot is nearing, which is the takeaway from the latest FOMC minutes.
Here are key points of the Fed minutes keenly read by investors to gauge where the market sits in the central bank liquidity cycle.
For the first time tightening risks to the economy were acknowledged in the minutes, an indication Fed pivot is nearing
Here is the dovish text in context.
“Fed officials remain “highly attentive to inflation risks” and are committed to bringing down price increases and keeping inflation expectations anchored, even if it slows economic growth. Still, policymakers also talked about the risks of tightening too much, noting there is a possibility the Fed “could tighten the stance of policy by more than necessary to restore price stability,” according to the minutes.
“It is likely to become appropriate at some point to slow the pace of policy rate increases,” stated the minutes.
So the Fed is explicitly talking about slowing down rate hikes, which indicates peak tightening, and the Fed pivot is nearing.
But don’t rule out a bullish hawkish rate hike if more Alica and Wonderland data from the economy hits your screens.
So standby for more policy-making smoke screens and mirrors.
“Policymakers said the economy is still stable for now — despite the drop in GDP — pointing to strong jobs growth, a low unemployment rate, and elevated wage growth. They discussed the possibility that GDP growth could later be revised upward to resolve the discrepancy.”
If households spend double for a bag of groceries and to pump juice in their cars, they are spending more due to inflation. So when inflation is underreported, GDP measured in dollars inevitably rises. That is just logic.
So through the fabricated optics, do not be surprised to see a recovering GDP with the economy out of a recession going forward. Amazon’s 100,000 job cuts in August reflect industry-wide adjustments to economic uncertainties.
The Fed’s optics of a stable economy and strong job growth does not jibe with reality.
Even if the Fed pivot nearing scenario fails to play out, they could manufacture optimism by touting further tightening as bullish rate hikes
The fact that your friends, neighbors, and maybe even you are losing jobs, despite a recovering economy will be explained as a jobless economic recovery.
In other words, the relief rally could continue even if the Fed pivot nearing does not play out.
Financial markets are the Fed’s trillion dollar game, they ignite animal spirits as and when the private and secret shareholders of the mother of all banking cartel tell them to do so.
So the first half of 2022, where over 9 trillion dollars were wiped off assets as the bubble of everything popped, could have reached Fed Chair Powell’s pain threshold.
Rember, the primary function of a cartel is to keep its members flush. The banks are squealing.
Here is the zinger on why the Fed pivot is nearing; “Several participants noted that capital at some of the largest banks had declined in recent quarters.”