This chart shows you everything you need to know about inflation. I was shopping yesterday and my steak cost 1/LB more than last month.
If Powell doesn't go .5% today, this blow up to new ATH, and inflation will force his hand in July. Inflation isn't going away any time soon, look at gold, oil, etc. Traders are pumping commodities every time they pump the stock market.
Keep in mind .25% today and ,25% in March is already priced in and this is headed to new highs. Note: weekly chart
Why do you think focusing on cattle futures makes your case that inflation is raging? This is called cherry-picking. I'm no cattle expert, but there could be some specific reasons why cattle in particular are more expensive now, like droughts earlier that forced ranchers to cull herds and such.
As for oil, oil is actually down significantly, and natural gas is even more down. Gold doesn't feed into inflation, so isn't too relevant.
Inflation is coming down when looking at more components than cattle, and recession worries are getting stronger and stronger, with EU already flirting with recession as of Q4 (which then means we are close behind). I don't see the big deal with the Fed doing 0.25 or pausing now, and evaluating. Rates are already quite high at 4.25-4.50, it's not like we are still in the 3s or 2s or 1s anymore. We have raised rates aggressively, I think more aggressively than in decades, and there is lag time to see the economic effects from it. Pausing now and waiting to see what is actually the effect would make plenty of sense, given recession worries already appearing and inflation metrics down significantly (energy for example, which is a basic resource that affects inflation in everything else).
Cherry picking my ass. Anyone that's traded commodities knows commodity futures rise with the stock market, if the Fed wants to control inflation they need to hammer down the stock market.
@hungry_hippo, Interesting points. I admit I am surprised to see even soybean futures up so much since money printing of 2020, and that it hasn't come back down.
hungry_hippo
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@EnderKira, the Fed can't reduce their balance sheet because they're under water on all of the MBS they hold. If they marked to market, they're looking at a 1T loss right now. All they can do is to let them expire slowly. Here's the real picture (Fed website so you know I'm not making it up) federalreserve.gov/monetarypolicy/bst_recenttrends.htm
EnderKira
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@hungry_hippo, Yeah, no I agree with all that. I think the Fed is screwed, ultimately, and that we have a calamity. Just waiting for that point, not sure when it occurs.
hungry_hippo
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@EnderKira, well Powell screwed up as usual. Expect inflation to rebound. I'm stocking up on pasta, rice, and ammo lol.
I have SPX doing a double top if you look at my ES1! plot
hungry_hippo
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@EnderKira, the Fed can push the market down now or they have to hammer it later. Makes more sense to do it now or we're headed above 5%.
If Powell was more blunt and said "Stop pumping commodity futures or I raise rates" then this wouldn't be a problem. Instead they're looking at trailing data. Incompetent morons. I predicted this debacle 2 years ago when he said "transitory inflation". That's complete nonsense, it's not in any economics book ever.
hungry_hippo
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@EnderKira, BTW, have you even looked at the Euro stock market? FDAX and the rest of them are closing in on a double top. They have NOT priced in a recession at all.
SquishTrade
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Not many people post cattle futures charts. But it's an interesting data point. And that is quite an uptrend since early 2020. Moo!
As for oil, oil is actually down significantly, and natural gas is even more down. Gold doesn't feed into inflation, so isn't too relevant.
Inflation is coming down when looking at more components than cattle, and recession worries are getting stronger and stronger, with EU already flirting with recession as of Q4 (which then means we are close behind). I don't see the big deal with the Fed doing 0.25 or pausing now, and evaluating. Rates are already quite high at 4.25-4.50, it's not like we are still in the 3s or 2s or 1s anymore. We have raised rates aggressively, I think more aggressively than in decades, and there is lag time to see the economic effects from it. Pausing now and waiting to see what is actually the effect would make plenty of sense, given recession worries already appearing and inflation metrics down significantly (energy for example, which is a basic resource that affects inflation in everything else).