Federal Reserve | timiacono.com - Part 4

Inflation and the Fed

They’ll probably be writing about this in the next update to the Federal Reserve policy manual as it has become increasingly clear that current Fed policies that have strengthened the dollar (i.e., talking about raising interest rates) have caused the government’s measure of inflation to move lower as shown below via this story at Bloomberg, all of which makes the case for actually raising rates (in the minds of economists) much more difficult.

Recall that there is a strong inverse correlation between the trade weighted dollar and both import prices and oil prices, so, the more the Fed talks about higher rates, the stronger the dollar gets, and the more difficult it becomes for the central bank to hit its inflation target of 2 percent, a target for which there is virtually no justification.

Yellen: Agonizing to Watch

In a speech at the University of Massachesetts last night, Federal Reserve Chair Janet Yellen said that the prospects for the U.S. economy “generally remain solid” and that the central bank is “on track” to raise interest rates in the months ahead.

Then dehydration is said to have caught up with her and she cut her speech short:

She received medical attention then resumed her schedule as the stock market ripped higher, traders concluding that she was just fake vomiting, something that Stephen Colbert popularized on his Comedy Central show and brought to CBS with Emily Blunt the other day.

Fed opens Pandora’s box

There’s been lots of discussion about monetary policy since last Thursday’s no-decision by the Fed on interest rates and Mike Baele, senior portfolio manager at US Bank Private Client Reserve, wonders what the central bank is thinking with its new focus on the global economy and foreign stock markets, all of which seems to have confused investors.

See also Bill Gross’ latest commentary in which he urges the Fed to move:

Near term pain? Yes. Long term gain? Almost certainly. Get off zero now!

Shkreli Makes a Splash

Hedge fund manager turned pharmaceutical company wunderkind Martin Shkreli made a grand entrance onto the national stage yesterday by defending his company’s decision to raise the price of an AIDs related drug from $13.50 per pill to $750.

His actions prompted a tweet from Hillary Clinton that sent Biotech stocks plunging (no doubt endearing himself to other Biotech CEOs) while generating headlines like these:

Not sure if that old saying “any publicity is good publicity” applies in this case.

Investors Hate Stocks?

According to the graphic below from this Bloomberg story, investor sentiment has recently plunged along with stock prices, but, “fret not” they say, as big gains normally await those who dare to invest money after such an historic loss of confidence.


It’s hard to know what the correct price of anything is these days, what with the central banks of the world having their heavy thumbs on the scale and investors never knowing if or when they’ll relent, last week’s Fed no-decision being the latest example of such.

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