White House and Fed officials strongly believe that inflation is only temporary, but what happens if they’re wrong? If inflation remains uncomfortably high, experts say it could threaten economic recovery, the stock market boom, and even Biden’s agenda. If prices don’t drop, Fed officials would need to cool inflation off by swiftly raising interest rates. Those higher borrowing costs would then slow or even derail the economic recovery.
CNN Business/Matt Egan
All bets are off if the Fed and White House are wrong about inflation
The White House and the Federal Reserve broadly agree: Inflation isn’t here to stay. Red-hot prices will cool off as the US economy reopens.
Most economists seem to concur that inflation is “transitory,” as the Fed puts it. Investors aren’t freaking out either about the biggest price hikes since 2008.
But the stakes couldn’t be much higher here. If the consensus is wrong (as it sometimes is) and inflation remains uncomfortably high, it could threaten the economic recovery, the stock market boom and even the Biden agenda.
“It still screams transitory to us,” said Stephanie Roth, senior markets economist at JPMorgan Private Bank. “If we’re wrong, it could shorten the economic cycle that we’re in.”
In other words, the Fed would need to cool inflation off by swiftly raising interest rates. Higher borrowing costs would slow or even derail the economic recovery.
At the same time, high inflation and higher rates would make it harder for President Joe Biden to enact sweeping infrastructure and social safety net programs costing more than $4 trillion.
“The Fed is playing a game of chicken that they’re going to lose,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “I think the Fed will be wrong on inflation being temporary.”
Continue reading, here.
Reuters via CNBC
Gold firms as dollar softens, focus on Fed verdict
Gold firmed near the key $1,800 level on Tuesday, as the dollar softened and U.S. real yields plunged, though gains were limited by investor caution ahead of a Federal Reserve meeting that could provide details on stimulus tapering.
Spot gold rose 0.2% to $1,800.46 per ounce by 2:39 p.m. ET. U.S. gold futures settled little changed at $1,799.80.
The dollar index slipped 0.3%, lowering gold’s cost for holders of other currencies.
Also, the yield on 10-year Treasury inflation-protected securities (TIPS) hit a record low, translating into reduced opportunity cost of holding gold.
The precious metal has been confined to a tight trading range in recent weeks after briefly crossing $1,830, failing to capitalize on subdued U.S benchmark Treasury yields.
“Gold has to be looked at from a cross asset perspective and not just from bonds, and with strong returns in equity markets that impede capital flows into gold,” said Bart Melek, head of commodity strategies at TD Securities.
You can read the full story, here.
Fox Business/Edmund DeMarche
Biden admin announces ‘Make Buy American Real’ to close loopholes in statute, boost transparency
The Biden administration announced Wednesday plans to introduce the “Make Buy American Real” rule that it says will advance the White House’s commitment to “ensuring the future of America is Made in America.”
“Made in USA” tags are, of course, ubiquitous in various department stores and home improvement retailers. But the tag may not always tell the entire story.
The administration pointed out that for products to qualify as American-made, just 55% of their parts need to be manufactured in the states. Part of the proposal is to move that threshold to 60% “and a phased increase to 75%.”
Another part of the initiative is to shore up the U.S.’s domestic supply chain by proposing “enhanced price preferences to select critical products and components.
“These preferences, once in place, would support the development and expansion of domestic supply chains for critical products by providing a source of stable demand for domestically produced critical products,” the administration’s statement read.
Keep reading, here.