Giles Keating

The Fed is behind the curve

  • With core CPI and 6-month PCE inflation at or above 2%, and real short rates still deeply negative, the Fed is clearly behind the curve
  • Some people found the Fed’s report dovish, but subtle hints, notably the rise in the number of staffers expecting three rate rises this year, suggests the contrary: the Fed may be paving the way for further acceleration in its tightening
  • This would likely cause market corrections, in equities and especially in the most over-stretched credits, but would help avoid the much larger crash that could come later if they keep going slowly.

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