The Fed has been trying to convince us that inflation can tame itself, but returning to a rate of 2% is going to cost us, one economist warns. As the Fed continues to change procedures on a whim, the goals of price stability and full employment remain at odds. In order to achieve the internationally accepted 2% target, economist Robert Brusca says there are only two options: raise interest rates much higher sooner or keep them higher for longer—two options the Fed will not be transparent about. As inflation grows, U.S. stocks have taken a beating. “We really think the Fed will need to cut the rates for the market to rally on a sustainable basis,” JP Morgan’s chief strategist said on Tuesday, after the S&P 500 had its worst day of the year so far. Today, the Fed will publish the minutes from its last meeting, which may shed light on future rate hikes.

MarketWatch/Robert Brusca
Opinion: Inflation needs to get back to 2%, but the Fed refuses to do what it takes and we’re paying a high price — literally.

Ever since U.S. inflation began to go wild, we have existed in an environment that in many ways hasn’t make any sense.

In the first place the Federal Reserve had promised that it would corral inflation around the 2% mark, and then it failed to do that. After having a period from 2012, when it adopted targeting, through 2019 when inflation consistently but mildly undershot its target, the Fed changed its objective to allow inflation to run a little bit hot relative to its 2% target and then strangely, it promised forbearance on raising rates until the economy had achieved full employment.

These changes represented heresy with respect to the monetary rules that were the backbone of good monetary policy.

Continue reading, here.

Business Insider/Zahra Tayeb
The S&P 500 faces a near-term selloff and likely won’t rally until the Fed starts cutting rates, JPMorgan’s top strategist says

The S&P 500 faces a near-term selloff and likely won’t rally until the Federal Reserve starts cutting interest rates, according to JPMorgan’s top strategist.

Marko Kolanovic said Tuesday he expects US stocks to fall another 5%, while the more volatile tech shares could drop up to 10%, in a CNBC interview.

“We really think the Fed will need to cut the rates for the market to rally on a sustainable basis,” the bank’s chief strategist said.

You can read the full article, here.

Bloomberg via Yahoo Finance/Jonnelle Marte
Fed Minutes to Show Support Level for Larger Hikes, Higher Peak

Federal Reserve officials could shed light on how many policymakers saw the case for a larger interest-rate increase at their last meeting and whether they anticipated the need to take rates higher than previously thought to tame persistently high inflation.

US central bankers will publish minutes at 2 p.m. Wednesday of their Jan. 31-Feb. 1 gathering, at which they voted unanimously to raise rates by just a quarter percentage point.

That was a moderation from their half-point hike in December after four consecutive jumbo-sized 75 basis-point increases. The action brought the Fed’s benchmark policy rate to a target range of 4.5% to 4.75%.

You can read the full article, here.

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