Surging inflation puts the Fed in an impossible situation

Bloomberg/Robert Burgess/2-10-2022

“Immediately after the release of the CPI report, the money markets priced in the possibility that the central bank will be forced to raise interest rates higher and faster than it has projected, including a 50-basis-point increase at policy makers’ March 15-16 meeting. Traders also now expect a full percentage point of increases by the end of July, according to Bloomberg News. Moreover, the difference between short- and long-term bond rates — better known as the yield curve — continued to collapse.”

USAGOLD note: Even if the Fed raises rates a full percent, it will still put interest rates significantly below the inflation rate. Thus you really do get the worst of both worlds a “sharp slowdown” mixed with “hot inflation.” Too, the market is full of eddies, crosscurrents, and strong undertows driven by excessive leverage wherever the Fed might care to look. Beware the black swan ……