Federal Reserve chairman Jerome Powell likes to describe the threat of inflation as “transitory,” but one analyst says he needs a new catchphrase to really describe it. Experts say that each day it appears inflation pressures are mounting more than the Fed would like and it needs to get real about the issue at hand. In other news, gold held steady on Friday, bringing it closer to its third weekly gain.
CNN Business/Paul R. La Monica
The Fed needs to get real about inflation
Federal Reserve chairman Jerome Powell loves to use the word “transitory” to describe the threat of inflation. But with each passing day, it looks more and more like inflation pressures are mounting in a much more significant manner than the Fed would like.
The use of the word “transitory” could very well turn out to be transitory. Powell may need a new catchphrase to describe how inflation might be a bit stickier and thornier problem.
Wages are rising and so are bond yields. The housing market is still chugging along. The prices of many retail goods are going up, partly because of supply shortages but also because of real demand.
It is true that the US economy (especially the job market) still hasn’t fully recovered from the depths of the coronavirus recession. But the Fed may be underestimating the recent rebound and the potential for sky-high inflation like in the late 1970s and early 1980s.
“The Fed is putting out the message that inflation is transitory and that there are still 8 million unemployed. The problem is that price expectations in various markets from wood to labor and company pricing strategies are running ahead of economic reality,” said Sebastien Galy, senior macro strategist at Nordea Asset Management, in a report Wednesday.
“It will likely take two months for pricing strategies and wage expectations to gravitate back towards something more realistic,” Galy added.
Keeping reading, here.
Reuters via CNBC/Sethuraman N R
Gold heads for third weekly gain as Fed taper fears ebb
Gold held steady on Friday en route to a third straight weekly gain, supported by a weaker U.S. dollar and subdued Treasury yields as concern receded over tapering by the U.S. Federal Reserve.
Spot gold was little changed at $1,876.70 an ounce by 0914 GMT and was up 1.9% on the week. U.S. gold futures fell 0.2% to $1,877.90.
“Overall, investors are not too worried about (monetary) tightening at the moment. And we have seen the bond yields in the U.S. come down a little bit and that has allowed gold to remain near recent highs,” said ThinkMarkets analyst Fawad Razaqzada.
“From a technical point of view, it has broken lots of resistance levels. So it has kind of reduced the bearish bias. The path of least resistance is to the upside and $1,900 is the next logical target.”
Gold has steadied after minutes from the Fed’s April meeting mentioned possible future discussions on paring stimulus, prompting speculation over potential increases to interest rates.
The dollar hovered around recent lows against its rivals and was heading for a weekly loss while benchmark 10-year Treasury yields fell.
Continue reading, here.
Fox Business/Chase Williams
Cryptocurrency crackdown by China is about more than the ‘safety of people’s property’
China may not seem like a supporter of cryptocurrencies, based on moves its financial community made this week, however it does back the emerging monetary form — but that support is limited to its own efforts.
On Wednesday the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association jointly issued what it called a “risk warning,” according to the state-owned China Times. “Prices of cryptocurrency have skyrocketed and plummeted recently, and speculative trading has bounced back. This seriously harms the safety of people’s property and disturbs normal economic and financial orders,” said the statement from regulators which are overseen by the People’s Bank of China and the China Insurance and Banking Commission.
While the move echoed previous announcements, it made clear in no uncertain terms that financial institutions and payment companies should not participate in any cryptocurrency-related transactions or services. The comments helped send the price of Bitcoin plummeting to its lowest price since January – $30,066,– before recovering Thursday at around $41,000.
Despite the People’s Bank of China (PBOC) as well as its agencies’ public concerns about the “safety of people’s property” many monetary experts see self-interest as the driver behind the statements.
“Whether or not this announcement from Chinese authorities, which reiterated bans from 2013 and 2017, was the cause of the decline in Bitcoin prices this week is unclear. But, what is clear is that China would rather have its citizens use its state-controlled financial systems rather than open, permission-less ones like Bitcoin and the variety of decentralized applications built on Ethereum,” said Tyler Whirty, founder of HODLpac and venture investor at the DC-based Takoma Group.
.Read the full story, here.