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Does The Fed Even See That Inflation Risks Are Skewed To The Upside?!

inflation risks upside
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EDITOR'S NOTE: In the article below Mish takes apart the most recent Fed minutes to show just how far from reality the central bank is operating. According to the Fed, the economy is about to rebound and advance from this point on. Consumer spending is about to pick up at a robust pace (never mind how inflation is eating into household wealth). And by the way, the economy is “very strong.” But perhaps the Fed isn’t overly optimistic. Perhaps we are not to take this segment of the Fed’s statements literally; the bright outlook should be read as a kind of “ceremonial misdirection,” or a spin before the sobering news. And that dose of sobriety comes in the form of the risk discussion. Count how many times the Fed mentions “inflation” in the minutes and how many times it hints at upside risks. Former Fed Chair Alan Greenspan taught us that there’s an art to interpreting Fed-speak. Today’s Fed-speak may not be as layered with jargonistic complexity as it was under the Greenspan era, but it's arguably just as opaque, coded, and misleading as it ever was.

Minutes from the FOMC meeting on May 3-4 show concern about what the average person already knows.

Minutes of the Federal Open Market Committee

Please consider the Minutes of the FOMC May 2-3 Meeting

Notably, the Fed is sticking with an overoptimistic economic outlook. The staff anticipates "GDP growth would rebound in the second quarter and advance at a solid pace over the remainder of the year."

On retail sales, "participants indicated that they expected robust growth in consumption spending. They pointed to several elements supporting this outlook, including strong household balance sheets, wide availability of jobs, and the U.S. economy's resilience in the face of new waves of the virus."

"All participants concurred that the U.S. economy was very strong, the labor market was extremely tight, and inflation was very high and well above the Committee's 2 percent inflation objective."

The Fed is drinking Kool-Aid. A recession is baked in the cake, and obviously so. 

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