The Fed Just Admitted It No Longer Has a Clue What’s Going On

Thursday, August 24, 2017
By Paul Martin

By: Graham Summers
Thursday, 24 August 2017

The Fed July FOMC minutes, that were released last week, were nothing short of extraordinary. However, to fully appreciate just what the Fed admitted, we first need a little background.

From November 2016 until June 2017, the Fed was pushing a hawkish agenda. The running mantra at this time was that the Fed would raise rates 3-4 times in 2017. As the year progressed, the Fed also began talking about shrinking its balance sheet.

The Fed’s justification for these moves was that inflation was rising and the economy was strong enough to tolerate these moves. As a result the Fed hiked rates twice, first in March and then again in June 2017.

Then, in late June, the Fed suddenly did a complete 180, stating that it was just about done with rate hikes. Moreover, the Fed stated that shrinking its balance sheet would not remove liquidity from the system.

Put simply, the Fed switched from hawkish to completely dovish in the span of two weeks.

This, in of itself, was bizarre. The Fed’s entire purpose is to maintain financial stability. How it could possibly claim it is doing this by changing its entire strategy suddenly and without warning is beyond me.

And then we get last week’s release of the Fed July FOMC minutes.

The minutes were complete insanity. I realize that many commentators are trying to argue that the Fed was hawkish. But it wasn’t. The Fed was in total chaos.

Let’s take the example of inflation.

According to the July FOMC statement…

1. Most participants expect inflation to pick up over the next couple years.

2. Many Fed participants think inflation will remain below 2% longer than expected.

3. Many Fed participants believe that inflation measures dropped recently due to “idiosyncratic factors.”

The Rest…HERE

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