Ahead of the May 3rd meeting of the US Federal Reserve Bank's FOMC (Federal Open Market Committee) the debate is raging ... will and should the Fed hike their official short-term interest (policy) rate again, or not.
The year-year rate-of-change in the US Consumer Price Index has disinflated to "only" +5.0% amid a massive single-month decline posted for March as the Energy "Base Effect" started to impact the data. This is a phenomenon that becomes much more intense, and potentially disinflationary, over the next three months, with the potential to bring the PCE inflation rate down to a "three-handle" (AKA three-something percent on a year-year basis).
If that happens, and it will unless Gasoline prices SOAR in the next 6-8 weeks (certainly possible, but not likely, even in the face of a deep year-year deficit in US inventories) ... then at the Fed's CURRENT Fed Funds Rate of 5% (top end of the range) monetary policy would finally reach the Fed's objective, by becoming "restrictive".
Consider that the three most used words in the Fed's own Beige Book were "soft", "softer", and "softened" ... and ... that the CB noted that the US consumer is in retreat, demand is softening, and even the labor market is loosening. Within that context I must ask WHY??? WHY in The Charmin Soft Economy" does the Fed need to raise rates again, and risk causing a FURTHER tightening in "credit conditions", the VERY LAST thing the Fed, or anyone else, wants right now.
There is A LOT going on, but there are ways to benefit from the market action, within the context of what is coming next. Greg discusses ALL of this, and then some, in Episode 007 of "Money, Markets & New Age Investing."
And make sure to take advantage of the offer for some free material at the end of this podcast.
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