Investor Stanley Druckenmiller is warning that Fed policies aimed at keeping markets and the economy afloat during the pandemic could end up threatening the long-term health of the U.S. dollar. He said he agreed with the early steps the Federal Reserve took during the pandemic; however, he said those policies have gone on for too long. At the same time, some economists are warning that the Fed will either lose control of inflation or cash the markets. With inflation worries rising, experts are now saying that Americans are fearing the worst inflation rate since 2013.
Stanley Druckenmiller says the Fed is endangering the dollar’s global reserve status
Federal Reserve policies aimed at keeping markets and the economy afloat during the pandemic could end up threatening the long-term health of the U.S. dollar, investing magnate Stanley Druckenmiller told CNBC on Tuesday.
The chairman and CEO of Duquesne Family Office said the Fed’s insistence on holding interest rates down and buying trillions in bonds even though markets are thriving and the economy is booming is a long-term risk.
“I can’t find any period in history where monetary and fiscal policy were this out of step with the economic circumstances, not one,” Druckenmiller said during a ”Squawk Box” interview.
Though he does not take issue with the Fed’s initial actions to combat the pandemic-related threats, Druckenmiller said the central bank has kept its foot on the accelerator too long.
He asserted that the Fed has continued its policies to help underwrite the spending binge in Congress, which has allocated more than $5 trillion in stimulus and is contemplating trillions more in infrastructure-related spending.
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Fox Business/Megan Henney
Americans fear worst inflation rate since 2013
U.S. consumers’ inflation fears grew in April as the nation’s economic recovery from the coronavirus pandemic accelerated, boosted by trillions in government stimulus.
Median expectations for the inflation rate for the next 12 months rose to 3.4% from 3.2% last month, according to the New York Federal Reserve’s Survey of Consumer Expectations. Expectations for inflation over the next three years remained unchanged at 3.1%, the highest since July 2014.
Expectations for home-price inflation rose to a record-high of 5.5%, up from 4.8% the previous month, amid as a housing boom has driven a surge in property values nationwide. Consumers said they expect gas prices and medical care to cost less in the coming year, but indicated they’re preparing to pay more for things like rent and college tuition.
Some investors and critics have raised concerns in recent weeks that low interest rates, combined with massive spending proposals from the Biden administration, could lead to a rise in inflation unseen for years.
Since the pandemic began a little more than one year ago, Congress has approved nearly $6 trillion in federal spending designed to keep the nation’s economy afloat. The exorbitant level of spending pushed the nation’s deficit to a record $3.1 trillion for the 2020 fiscal year and a high of $1.7 trillion for the first half of fiscal 2021.
The Federal Reserve has held interest rates near zero since March 2020, even as the economy’s recovery from the pandemic rapidly strengthens.
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Yahoo! Business/Emily McCormick and Javier E. David
Wall Street in the red as inflation jitters spook markets
Stock futures pointed lower on Wednesday, indicating Wall Street was bracing for a second day of declines, as the fear of rising inflation forced the Dow to its worst one-day decline since February, and amplified new concerns about the rebound from COVID-19.
With a weekend cyber-attack sharply driving up the cost of gas nationwide — while sparking shortages — investors are growing increasingly restive over inflation. Mounting signs of supply shortages in the face of surging demand threatening to spur a rapid rise in prices.
Those fears crystallized on Wednesday, after the government reported that headline consumer prices surged by a faster than expected 4.2% last month. Excluding food and energy, prices jumped 0.9 percent in April (SA) and are up 3.0 percent over the year.
The jitters have surfaced as the U.S. economic recovery — hammered by the COVID-19 pandemic — appears to be quickening. A report from the Labor Department on Tuesday showed job openings reached a record high in March, and a separate survey showed a record proportion of small business owners reported job postings that could not be filled last month.
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