This week Norway’s central banks laid out their plan to begin raising rates as early as September. This is a natural step for a country that is focused on keeping their currency strong. I have always respected Jerome Powell for having that same objective for the U.S. I have felt confident in his commitment to a strong dollar as Fed Chairman. However, the message from the Federal Reserve this week has me scratching my head.
Powell acted intuitively during President Trump’s term and decisively throughout the critical months of economic shutdown. I have said many times that I believe history will remember him as one the best Chairs of the Federal Reserve. But his current strategy, or lack thereof, in the face of rising inflation is confusing and concerning. The last time Powell spoke on this topic he stated that his expectation for inflation this year was 2.4%. Yesterday he bumped that expectation to 3.4%, and yet plans to stay the course.
But what course are we staying? For anyone paying attention, the plight of homebuilders, small businesses, the auto industry, international trade, manufacturing, and supply chains have increasingly revealed more about the volatile state of our economy than Wall Street has been willing to acknowledge.
The economy and the markets simply cannot be sustained much longer. Inflation is coming and the Trump-built economic fundamentals will not withstand the attacks of pro-bigger government, endless spending, deeper debt, more regulatory burden, and the globalist mentality that is continuing to permeate Washington. Despite what the Federal Reserve tells you, these concerns are not transitory. They are steeped in a leftist ideology that will destroy all opportunities for sustainable growth.
Business sentiment and consumer confidence will continue to drop, and we will see a hunker-down mentality forming in the working class that will drive consumer spending down. Already homebuilders and small businesses seem to be anticipating a slowdown. Expect to see a rise in pessimism in general and a drop in economic growth. The drop in GDP and the ongoing government spending will be a lethal combination to our debt-to-GDP ratio, possibly creating the highest ratio since the start of WWII.
The Federal Reserve is currently buying back $40 billion worth of mortgage-backed securities every month and yet somehow never addressed housing or construction concerns during this week’s press conference. I like Jerome Powell and I believe he has done a great job for America. Yet his statements this week led me to believe that politics are shaping the Federal Reserve more than truthful analytics. And I believe globalist-minded Janet Yellen plays a big role in his decisions. Why revive an economic system when you can control it?
Powell indicated that rates may be raised in 2023. Let’s hope that the US dollar can withstand 18 months of pretending everything is okay.
Dan Celia is president and CEO of Financial Issues Stewardship Ministries, Inc., and host of the nationally syndicated radio and television program “Financial Issues,” heard daily on more than 660 stations across the country, reaching millions of households on several TV networks, including FISM-TV. Visit www.financialissues.org.)
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