Thomas Hayes, managing member and chairman at Great Hill Capital, is expecting the Fed to remain cautious as they try to balance the two issues while still protecting the U.S. economy.
"I think you're seeing the Fed trying to walk the tightrope," Hayes said on Yahoo Finance Live (video above). "They wanted to bring down demand, which they've certainly done, but they don't want to destroy the economy."
A key example, he said, is how the Fed promised to do $47.5 billion of liquidity withdrawal or tightening in the month of June, but instead wound up buying roughly $3 billion net of treasuries and reduced liquidity by just $7.5 billion in mortgage-backed securities.
"They're jawboning to bring down demand, to bring down inflation," Hayes said. "But they don't want to push too hard because you see things like the jobless claims jump to 244,000... they're trying to navigate and hopefully get some type of soft landing."
Because inflation is a lagging indicator, he said, it often doesn't reflect how the Fed's actions have affected consumer behavior and market sentiment.
"Monetary policy works on a lagged basis, so they've done a meaningful amount of tightening in the first half of this year," Hayes said. "We're seeing it in reduced demand and some jobless numbers starting to tick up."
'The market wants 75 at this point'
Fed Chairman Jerome Powell has remained adamant that the Fed is committed to restoring price stability and taming inflation.
However, at Powell's Semiannual Monetary Policy Report to the Senate Banking Committee, he explained that a soft landing — a decrease in economic growth that curbs recession — would be "very challenging."
Inflation jumped 9.1% in the month of June while consumer sentiment, a key indicator of how individuals feel about their finances and the economy, fell to 98.7. However, Hayes said that commodity prices should be another factor for the Fed to consider for any action moving forward.
Commodities have soared in 2022. Recent CPI data showed a 7.2% year-over-year surge in commodity prices. The Russian invasion of Ukraine and global supply chain bottlenecks are considered the main causes of these price bumps.
Comment: Whilst the current economic collapse has been decades in the making, because the issues of the 2008 financial meltdown were never addressed, it's the lockdowns enforced by governments across the planet, as well as the US pumping nearly $2 trillion into the economy as a lockdown 'stimulus' package that. could be assigned as the main catalysts for the current meltdown. Because even prior to Russia's retaliation to the West's proxy war in Ukraine, supply bottlenecks and shortages were already rife, inflation was already beginning to rise, albeit hidden through tricks like 'shrinkflation', and job participation was already at an all time low.
"The key is going to be: Does the commodities rollover from June — where you saw corn, soybeans, copper, oil, cotton, platinum, cocoa — all roll over?" Hayes said. "How quickly does that get to the cash register for the consumer, and can they jawbone until the actual prices come down, or do they have to move aggressively?"
Though some economists are predicting at 100 basis-point rate hike, Hayes is still anticipating a 0.75% increase.
"I think the market wants 75 at this point," Hayes said." I know a lot of people say we have to crush inflation, but they're backward-looking numbers."
But, he added, "you could certainly see a situation where they raise 75 basis points, the next day GDP comes out negative for Q2, and they go on pause. And that would be the best of all worlds in the sense of creating a soft landing moving forward."
Reader Comments
Second thought - "Well, if they have to say it, then they have some explaining to do."
It shouldn't need to be said.
This is exactly where "Vaxxing The Herd" fits in - less consumers = less demand = lower prices (as in the famous Hell Gates equation, it is enough to "bring one variable close to ZERO")
But yes, peer pressure makes most of the fools to run for the new I-phone and wait some 24 hours in a queue with similar-minded idiots..
Peer pressure is worst among children, it might be better to home-school them just for this reason (among MANY others, grooming just being added to the ever-expanding list)
Get ready.
Ken
as for my clothes, some of them are up to 25 years old as well.
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I have - several times but one time is one time too many you know what I mean.
See you in Buffalo on 4824 and please don't ask what that means because it will be evident soon enough!
Ken
ps - I sprayed my stuff and I think I just killed another gnat.....gnats - effing gnats.
Pay for goods using physical currency - be it on a piece of paper in your hand or some coin in your pocket.
Barter is truly the most seamless sort of business and tis best done local.
Local commerce will destroy the Fed 8 days a week.
Time will tell.
BK
Here is a great song in that vein:
Reminds me of John Brown.....
The Pogues - USA
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Unless you count in tourists like myself, I much prefer hard cash over any type of plastic.. then again, I don't really pay any considerable amounts for accommodation nor for transport usually
I've spent two weeks in Spain just squatting at random places and buying food & beverages only
Peace,
Ken
It was one hell of a ride though, I'd like to go there someday again, but I don't think it will be sooner than the Covid farce is DEAD FOR GOOD
Still, there are many places around I haven't been to yet, so.. Just need to grab a backpack full of food & drinks, my (new) pipe and I'm ready to go wherever my feet wander to..
Sadly I cannot cross the big pond separating us.. Maybe one day when the Covid is DEAD along with all responsible for it and the US lifts its ban on unvaxxed aliens, I might pay a visit.. If any civilization and airline travel exists at that point
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I think it is one of those trails.....I like to hike and I still can do it, but I just prefer to be a homebody lately. If you ever are in the area, I'll take you to some trails if you want to go with me.
Ken
Are Trump Bucks a scam?
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“Exceptional gold foil with a deep emboss and a portrait of Donald Trump as US president. In no way should it be viewed as an investment opportunity.”
But Trump says: [Link]
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Eric Trump: [Link]
They don’t tell you that although you register them on Sept. 15, they only draw 10 numbers each month to ACTIVATE you bills for face value.
This is a lottery🤬🤬
That guy is a goddamn traitor
But we've got many of them in every country around the world, they're usually considered "the elites" by common
peoplesheeple[Link]
NewJew York that he's a Jew himself (now he is on the end of his term and ALL possible replacement is WAY WORSE than he was), so..I think the term "complicity" does apply in these cases.. But to defense of the common American - the Cricket Investment Agency with their Q-Anon psyop played a substantial role in decieving the gullible masses of right-wing conservatives, up to the point where many fanatically defend him up to this very day (and beyond their grave perhaps)