If the words of a person in the world are worth their weight in gold, then Federal Reserve Chairman Powell is one of them.
Last night, Powell’s speech no longer used the word 'temporary,' indicating the Federal Reserve's determination, and accelerating the bond-buying plan is putting those thoughts into practice.
The US inflation rate reached 2.6% in March, which should theoretically make the Fed vigilant. If the Fed is decisive enough, even without raising interest rates, it needs to slowly reduce the scale of bond purchases. However, constrained by the domestic economy still recovering, the Fed chooses to turn a blind eye and cover its ears.
In March, when inflation was high, the Fed said this was short-term and temporary because averaging the previous months’ figures made inflation rise moderately.
(1.4 + 1.4 + 1.7 + 2.6) / 4 = 1.775. The average inflation rate of 1.775 compared to February’s 1.7% inflation rate indeed showed moderate growth under this calculation method.
When the average inflation rate stabilized around 5.4, the Fed claimed that our core inflation rate was declining.
Hmm, if the Fed’s next step is to calculate the average using the core inflation rate, I think it’s normal. However, after the inflation rate hit a high of 6.4 in October, even the Fed’s titanium alloy mouth wasn't hard enough. Considering that the U.S. economy has recovered to a certain level, it’s not too late for the Fed to start tightening now. For investors, just the Fed's reduction in the number of bond purchases could cause a big drop in the U.S., but in fact, the Fed often triggered...