Hot, High and Longer

San Francisco Fed President Mary Daly made some candid comments today. She is part of the Fed’s core and was the first to announce a higher Fed rate in November 2021. Her recent comments are very optimistic, but that depends on the final data before the FOMC decision on 22 March.I am beginning to believe that there is a labour shortage in the labour market. Anecdotal evidence from business leaders suggests that inflation is slowing more than recent data suggests. Inflation is still high, we need to think about ‘continuous tightening’. It would be a mistake to say that we have done all we can do, the effects of policy are still ahead. Further, longer-term policy tightening is likely to be necessary. Job displacement and the continued decline in labour force participation could lead to stronger inflationary pressures. The necessary disinflation dynamics are far from certain.

However, from Governor Waller’s perspective, it appears that the Fed is preparing to shift the dots to 6% or just below. There is certainly a lot of grey area and it depends on the data between now and 22 March, but it is a fine line. Obviously Waller has not spooked the market so I do not think that will change with Daly, but Powell is speaking on Wednesday and if he strikes some of those notes the market might take notice.

This is a very good opportunity for all TFC investors because we have more room to grow. So letus enjoy our blackout period and make a higher profit while we weather the storm.

TFC Team
thefirm.sg

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