It’s Official: The Fed is Going to Unleash an Inflationary Storm
The comments below are an edited and abridged synopsis of an article by Phoenix Capital
The biggest news for the markets right now concerns the Fed and inflation. For the last 20 years, the Fed has aimed for a 2% inflation rate.
Everyone knows that the real rate of inflation is well above this level. But as the primary director of the financial system, the Fed’s target rate of inflation is used as a baseline for all major portfolio managers.
Which is why the following story is of major significance: “Powell set to deliver ‘profoundly consequential’ speech, changing how the Fed views inflation. He is expected to outline what could be the central bank’s most active efforts ever to spur inflation back to a healthy level. ‘Average inflation’ targeting means the Fed will allow inflation to run higher than normal for a period of time.” Source: CNBC.
In simple terms, the Fed is going to unleash inflation in a big way. How big?
The media is presenting Powell as the antithesis of former Fed Chair Paul Volcker, who is famous for stopping the runaway inflation of the late 1970s/early 1980s when interest rates rose to 19%. And Powell is being presented as the opposite of Volcker, happy to let the inflation genie out of the lamp.
This is going to unleash an inflationary storm that will send inflation hedges like gold and silver (and their miners) through the roof.
Indeed, gold is already on the rise. Imagine where it and other inflation hedges will go by the time the Fed has really fired up the printing presses.