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The Transitory Fed Moves Back Toward Its Asset-Price-Targeting Single Mandate

Adam Whitehead profile picture
Adam Whitehead
780 Followers

Summary

  • Fed Chairman Powell uses the word “transitory” in the wrong context.
  • The only thing that the Fed is certain about is its own uncertainty.
  • The Fed says that it is now in the inflation expectations targeting business rather than the inflation rate targeting business.
  • The Fed’s sole mandate remains the capital market asset price level management business first and foremost.
  • Adherence to the Congressional dual mandate is a “transitory” phase of the asset price level management single mandate.

(Source: AZ Quotes)

The Fed is playing a dangerous game of Russian roulette with President Trump. As it clings to its current policy stance, as an alleged signal of its independence, it is making some fundamental mistakes. It is also playing hard and fast with the data and the corresponding economic narrative. If and when it is caught out, Fed independence will be a historical footnote. Chairman Powell's use of the word "transitory" is apposite. Unfortunately, he has used it in the wrong context.

(Source: Gallup, caption by the Author)

The latest Gallup Poll shows that confidence in Chairman Powell's economic management remains the highest in the land of the free and home of the brave. President Trump is still within Tweetin' distance of the Chairman. The Republicans are gaining traction, whilst the Democrats remain encumbered by their recent Socialist leanings into the wind.

(Source: Sportskeeda, caption by the Author)

The Chairman also needs to address the fact that the President is maintaining the pressure and currently making an overtaking move. The Fed has already reached for the white flag of surrender, as noted in the last report. It may need to formalize its surrender under cover, by waving the blue flag; thereby allowing the President to overtake it, on his way to achieving the checkered flag of his promised 4% GDP target. Ostensibly, the Fed is already waving the blue flag, by changing its monetary policy emphasis from the inflation to its growth mandate.

(Source: Sportskeeda, caption by the Author)

The latest "blowout" GDP reading reflects a blowout in inventory building, in the run-up to global trade negotiations. The latest plummet in Core PCE suggests that the Fed has followed the previously rising inflation trend too slavishly. The last rate hike was, therefore, a mistake. Combining the growth and inflation data, on the

This article was written by

Adam Whitehead profile picture
780 Followers
Over thirty years of taking the volatility out of uncertainty, by taking the uncertainty out of volatility, for proprietary trading desks, commodity trading advisors, sovereign wealth funds and private offices.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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