Skip to main content

Traders focus on recent statements made by Federal Reserve members

Video section is only available for
PREMIUM MEMBERS

Market participants are once again focusing upon recent statements by multiple voting members of the Federal Reserve as to their next set of rate hikes over the remaining FOMC meetings this year. While the dollar had fractional gains today, it was the recent comments by Federal Reserve officials that warranted trader’s attention. It has become obvious to many economists, analysts, and market participants that the Federal Reserve has been ineffective in reducing inflation.

This has made recent aggressive or hawkish comments about further rate hikes less about reducing inflation and more about the net effect of a contracting economy based on the Fed’s recent rate hikes.

Since March the Federal Reserve has raised its Fed funds rate by 2.1/4% leading to only one major accomplishment if you can call it that. They have effectively contracted the U.S. economy for the last two consecutive quarters. Consumer spending is now growing at the slowest pace in two years as business expenditures decline. Whatever spin government officials put on the second quarter GDP report the facts speak for themselves.

We are steadfast in our belief that a pivot is taking place in which market participants are focusing on higher rates and their effect on the economy as well as the realization that the Federal Reserve has been ineffective at reducing inflation. This scenario led the U.S. economy into a recession, while having little impact on reducing inflation. This is the perfect recipe in which the outcome will be a period of stagflation that will present itself with a whole new set of issues.

Wishing you as always good trading,

Gary S. Wagner - Executive Producer