This has been a brutal week for consumers. With the Russia/Ukraine conflict raging and Congress seems determined to not allow for additional oil and gas production, and Biden’s anti-fossil fuel edicts still in place, we are seeing dramatic price increases in wheat (UP 89.5% since January 1, 2021), WTI Crude (UP 143% since January 1, 2021), and food stuffs (UP 55% since January 1, 2021).
Bankrate’s 30-year mortgage rate has actually been falling the last several days, which is good for prospective home buyers as the 10-year US Treasury Note yield has been declining.
The USD/Russian Ruble cross is skyrocketing and the USD/Euro is doing likewise. Russians visiting the US will find that their trip is suddenly unaffordable (as do many American citizens will its rampant inflation). As Bruce Willis said in “Die Hard,” “Welcome to the party, pal.”
On Friday, the US Treasury 10-year yield declined 11 bps.
And energy prices continue to soar, particularly UK Natural Gas Futures that rose 19.85% overnight.
The US inflation data will be released on March 10th and the consensus is that February CPI inflation will rise to 7.9% YoY.
But even the latest unemployment rate report (3.8%) is signalling that The Fed should be raising interest rates since it is lower than the Natural Rate of Unemployment or NAIRU (4.44%).
And we have the next Fed policy error on March 16th. The Fed dots plot looks like the glide slope for an aircraft, but the message is that rates will be going up at future meetings.
And just for amusement, I present to you the infamous Hindenburg Omen chart that forecast the 2008/2009 stock market correction. Since that correction, the Hindenburg Omen has been flashing “danger” but the only correction was the COVID-linked correction of early 2020. While the Hindenburg Omen is flashing red right now, The Federal Reserve’s balance sheet (green line) has protected against market corrections. Let’s see what happens if and when The Fed decides to remove the epic monetary stimulus.
Its anyone’s guess as to whether The Fed will actually tighten monetary policy.