Wall Street Silver Official Podcast: The Fed Is Too Late and Completely Clueless
While traders are becoming more mixed on the future direction of the economy and the stock market, many can agree that the Federal Reserve is to blame.
That’s because the central bank could have started its tightening policy in 2021, before allowing inflation to rise to multi-decade highs. By waiting until they did, the bank now appears behind the eight ball, and even clueless.
According to analyst Adrian Day, this has been a feature of the central bank. Their changing view on how to interpret policy based on inflation data is one reason.
The central bank has gone to an “inflation targeting” approach over the past few years. At first the idea was unofficial, but then was made official in 2020. This approach allowed the Fed to ignore rising inflation rates, initially describing them as transitory. By the time they committed to act, inflation was nearing a 40-year high.
Further, the Fed has now begun telegraphing its moves far in advance to not spook markets. That can cause a further lag time before policy change occurs, which can cause more economic damage in the meantime.
These moves indicate that inflation will likely continue being an issue for investors into 2023. And that risky assets will continue to remain volatile. It’s also a sign that the economy will continue to face dangers ahead, which won’t be headed off in a timely manner.