Fed correctly signals an easing bias - and there's no need to be concerned about it causing higher inflation
With the M2 money supply falling and disinflation deepening, the key question isn't whether the Fed should have switched to a loosening bias, but whether it will unwind its tightening fast enough.
After aggressive interest rate hikes and ongoing QT, the Fed has made its long-awaited shift to a loosening bias, with equities, bonds, gold and silver all rallying significantly in response.
In this update, I will unpack two key questions that many may have in response, being: 1) what exactly did the Fed announce? and 2) will it lead to a resurgence in inflation?
I will then make some concluding remarks — let’s dig in.
What exactly did the Fed announce? 📣
The Fed’s latest FOMC meeting resulted in several important updates.
Starting with the Fed’s latest FOMC statement, it:
notes that recent indicators suggest that economic growth “has slowed from its strong pace in the third quarter”;
notes that “inflation has eased over the past year but remains elevated” versus the prior “inflation remains elevated”; and
adds the word “any” to the following statement: “In determining the extent of any additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committ…