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No Rate Cuts and Out of Touch. Does the Fed Have Any Clue What To Do?

Blog Jun 13, 2024

In a significant development, the Federal Reserve just made an announcement for interest rates cuts, countering earlier expectations. Although the latest CPI report shows a slight drop in inflation, concerns persist over high and stagnant inflation levels. Fed Chair Jerome Powell’s emphasis on restoring price stability comes as the Fed projects higher long-term inflation, signaling a prolonged struggle and continued erosion of purchasing power.

TRANSCRIPT:

Hi everyone. Thank you for being here. Are you watching closely?

A wise person once told me, don’t listen to what they say. Watch what they do. And in this case, I’m referring to the Federal Reserve. In case you missed it, yesterday was the Federal Reserve’s June meeting and press conference announcing that rates were going to remain unchanged. But with so much noise being created, it’s easy to get lost and to focus on what they’re saying rather than what they’re doing.

Which is why we’re going to break it down together.

The Wall Street Journal says Fed projects just one cut this year despite mild inflation report. Now, the mild inflation report that they’re referring to is the CPI numbers for May, which is how we measure inflation. Those numbers came in at 3.3%, down from 3.4% in April measured year over year.

And believe me, we’re going to talk about why those numbers don’t tell the whole story here in a second. But first, this article goes on to say this was a very encouraging number, said Laurence Meyer, a former Fed Governor who runs an economic advisory firm. A very encouraging number….encouraging to who? 3.3% isn’t inflation coming down. It’s inflation staying stagnant and it’s inflation that’s already been high now for the last four years.

We have lost over 25% of our purchasing power in less than five years. So these numbers don’t tell me that we’re anywhere near where we should be. It just tells me that we still are experiencing prices much higher than any of us would like to see, and that maybe inflation is starting to slow, but it’s too early to tell anyway.

But again, that’s why for me, I don’t like to listen to what they say. Inflation is cooling. Inflation is good. People are relieved. No they’re not. The Federal Reserve, when it comes down to it, kept rates the same. And they’re saying they’re only going to have one rate cut this year. Now they did up next year’s rate cuts from 3 to 4. These are their projections. But these are the same people who told us that we would have six cuts this year.

Now, of course, that narrative has changed as inflation has remained strong and I think this is why it’s important to focus on what they’re doing versus what they’re saying. They can tell us all day long that the economy is strong, that their actions are working and that inflation is coming down, but what they’re doing tells a different story.

So another article that came out from the Hill says fed projects higher inflation, just one rate cut in 2024. Now this to me is interesting because while all the noise is that inflation is coming down, the Fed actually increased their inflation projections. And I think again that while they would love to have a rate cut at this point, they would have loved nothing more.

I mean, can you imagine the amount of pressure that Jerome Powell and the Federal Reserve are under right now keeping rates the same? What a win it would be for the current administration should they cut rates before the election? No, they they would love to deliver I’m sure, on rate cuts. But there’s a reason that they’re not.

Despite all of the rosy narrative around our economy and inflation, the reason that they’re not cutting rates is because they know they know as well as we do that inflation is going to be a years long battle. There is no easy fix. There is no quick win. It is what it is. We overspent as a country. We created this problem for ourselves.

Now again, not you and I personally, but our government has put us in a place where we’re being robbed. Inflation is theft. Inflation punishes savers and promotes spending and rewards borrowers. In this case, the borrowers are the United States government. That’s exactly what’s going on. And he knows it as well as you and I.

Listen, everything that the Federal Reserve says I take with a grain of salt. In fact, I take it with a tablespoon of salt. I don’t trust this as far as I can throw it. Which is why, again, I’m not putting too much stock in what they’re saying. I’m watching what they’re doing. That being said, there is a chance that we will see that one rate cut this year. Do I think it’s what’s right for inflation?

No. Absolutely not. We need to hunker down and it’s going to be more painful before it gets better. That being said, I could see the pressure getting to them. I could see them making the move to have one rate cut this year for that one, claiming that what they’re doing is working. At which point we could see the same mistakes that we saw in the 1970s, where two early rates were cut and there is a roaring back of inflation, at which point you and I lose even more of our purchasing power than we already have.

The dollar’s already worth so much less how much more can we really take?

In his press conference, Powell said he wants to restore price stability. Well good luck. I mean, what does that actually mean? Restore price stability again? It’s all noise because prices might stabilize. Maybe we had inflation from last month to this month, B-flat, but we’re still flat way above where we were just a few years ago.

So ultimately all this tells me, all this noise tells me is that inflation is here to stay. They would love nothing more than to cut rates. The fact that they’re not means that they know as well as we know inflation isn’t going anywhere, which also means that we can expect that our dollars will be worth less. Our dollars are worth less every second we sit here.

They’ll be worth less in a month. And they’ll probably be worth even less in a year. Who knows how quickly it’s going to happen? Who knows how quickly our purchasing power is going to continue to be eroded. But we know that that’s what’s happening, which is, again, and I don’t want to sound like a broken record here, but again, it’s truly why I believe in holding your wealth outside of dollar denominated assets.

And if you don’t know how to get started or where to begin, that’s what we’re here for. Our expert analysts have years of experience in helping people protect themselves against these very threats, against the destruction of your purchasing power, against the erosion of your wealth. That’s happening right here. The theft that inflation is. That’s what we’re here to help us.

And if you have any other thoughts, I would love to hear them. Please let me know in the comments below. Be sure to like and subscribe. It really helps us get the word out.

As always, I’m Taylor Kenney with ITM Trading. Your trusted source for all things gold, silver and lifelong wealth protection. Until next time.

SOURCES:

https://www.wsj.com/economy/central-banking/cpi-report-fed-meeting-interest-rate-ef93c8b0

https://thehill.com/business/4718471-fed-projects-higher-inflation-just-one-rate-cut-for-2024

Sources & References In This Article

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