Fed’s expected hike – and Powell’s comments were classic Powell – Part II

Yesterday’s article was composed within hours after Powell had concluded his press conference. While his statements were fresh in the minds of reporters and analysts asking questions, thinking about 24 hours after the fact his statements have left me bitter but more importantly questioning his ability to correctly communicate upcoming potential changes in the Federal Reserve’s monetary policy.

My closing statement said, the most meaningful way to end today’s article is to quote Chairman Powell with one of his greatest reveals from today’s press conference, “It’s not an environment where we want to provide a lot of forward guidance”.

Now that viewers have had time to let his words completely sink in, I believe that his tongue and cheek approach by not offering definitive answers and wording it in such a way that you could only interpret his approach as condescending, distasteful, and disrespectful.

From the beginning of 2020, the Fed incorrectly understood that inflation was NOT only transitory. Therefore, the Fed’s forward guidance was reactive rather than proactive. Mistakes made by incorrectly understanding the problem were the root cause of the issues we now face.

The Federal Reserve did not implement a single rate hike until headline inflation had already surpassed 8% in March 2022. For a full year before that, the Federal Reserve with the most current data available watched inflation increase from under 2% to one of the highest levels this century. I am convinced that had the Fed initiated a single rate hike when inflation first rose above their target of 2% a year before any action was taken, we would not be facing the high levels of inflation we are now. I believe that had the Fed acted a year earlier we would be dealing with the robust economy (which we currently have) coupled with acceptable levels of inflation and solid GDP growth.

In light of that, how can the chairman of the Federal Reserve when asked for insight into the forward guidance of the central bank of the United States the chairman can respond by saying, “It’s not an environment where we want to provide a lot of forward guidance”.

It is not acceptable to respond to a question about the Feds forward guidance by saying “we are NOT in an environment where we want to provide an answer to that question”.

In conclusion, unlike politicians, the Chairman of the Federal Reserve is appointed. Which is why I wonder if the chairman was under the same scrutiny as an elected official, would he still hold the office of Fed Chairman.

Wishing you as always good trading,