We are a ways away from substantial further progress. But we are still making progress. That’s according to Fed Chair Jerome Powell.
Soon after the Fed issued its statement, U.S. stocks fell further from their record highs, and bond yields rose.
As a result, Powell changed his tone and emphasized that inflation is temporary.
It’s been temporary for 40 years.
Powell is now emphasizing that the economy is still not where it should be, especially in terms of unemployment …. and the Fed still thinks the economy needs stimulus from the central bank.
He also said hiring should accelerate through summer and into the fall as COVID-19 recedes further with increased vaccinations. That will allow schools and daycare centers to reopen, which will enable more parents to work, while supplemental federal aid for the jobless ends.
Powell added that the Fed’s policymaking committee also began discussing when to reduce its monthly bond purchases. There’s no definite date yet but the purchases, which consist of $120 billion in Treasury and mortgage bonds, are intended to keep longer-term rates low to encourage borrowing.
The Fed has made clear that its first step in slowing its support for the economy will be to pare its bond purchases. And that it would begin to raise rates only sometime after that. Its key rate has been pinned near zero since March 2020.
Powell also emphasized that the Fed might be in a hurry to withdraw its economic support by making borrowing more expensive. The economy, he said, still hasn’t improved enough to reduce the pace of the monthly bond purchases, which the Fed has said it intends to continue until “substantial further progress” has been made toward its employment and inflation goals.
That’s a strikingly different tone from the original statement.
This, however, is important for us to know and understand.
The Fed and the entire government will say whatever they need to say to keep our confidence high. They will interpret numbers the way they want to make us feel better.
Another key consideration for the Fed is whether inflation persists long enough to affect the public’s behavior. If Americans begin to expect price increases, those expectations can trigger a self-fulfilling cycle as workers demand higher wages, which, in turn, can lead their employers to keep raising prices to offset their higher labor costs.
So, make sure to make your analysis and your own conclusions. Consult experts. That’s the only way you will get an objective view of our economy. And that’s the only way you can invest right and allocate your portfolio right.
Make sure you are well diversified. ETFs, stocks, bonds, crypto, businesses, and a hedge, a store of value.
There is no other asset that’s better than gold to do that. All throughout history, each time we go through economic distress, instability, and any sort of conflict, gold holds up, it thrives.
That’s why you need gold. You need that one asset that will shoot up when everything else is down and will remain steady.