Powell Flags Rising Inflation Risk While Playing Down Rate Hikes (US Dollar, 10Y Treasury Yield, Gold Fall With Powell’s Comments)

Like the old EF Hutton ads, “When Powell speaks, people listen.”

Federal Reserve Chair Jerome Powell sounded a note of heightened concern over persistently high inflation as he made clear that the central bank will begin tapering its bond purchases shortly but remain patient on raising interest rates. 

“The risks are clearly now to longer and more persistent bottlenecks, and thus to higher inflation,” Powell said Friday during a virtual panel discussion hosted by the South African Reserve Bank and moderated by Bloomberg’s Francine Lacqua. 

“I would say our policy is well-positioned to manage a range of plausible outcomes,” he said. “I do think it’s time to taper and I don’t think it’s time to raise rates.”

Good luck with that, Jay! You are going to raise the short-end of the yield that will lead to a flattening of the Treasury yield curve. But you are going to continue to buy Treasuries and Agency MBS in order to monetize the rampant spending by Congress and the Biden Administration? C’mon man!

You can see where Powell spoke today. It is when gold tanked along with the 10-year Treasury yield. Both rebounded a bit, but the 10-year Treasury yield continue its fall to 1.6324%.

The US dollar (green) fell when Powell opened his pie-hole. But Bitcoin (blue) fell in advance as if they knew what Powell was going to say.

Time To Buy? Real 30Y Mortgage Rate At -2.21% As Real Home Price Growth At 14.34% YoY (UMich Home Buying Sentiment Improves To 75)

Wake up. Time to buy?

This is a time even unlike the disastrous housing bubble of the 2000s that led to the financial crisis and Great Recession. Even during the housing bubble years, we still had positive REAL mortgage rates: Bankrate 30Y Fixed rate – CPI YoY. But today we have even FASTER REAL home price growth and NEGATIVE mortgage rates!

And yes, REAL home price growth is 14.34% YoY while REAL hourly earnings growth is -0.79%.

The University of Michigan consumer survey came out today and buying conditions for housing improved to 75. Which means that more people were negative than positive due to skyrocketing home prices.

With negative 30Y mortgage rates and rising apartment rents, is it time to buy? Just remember what happened to Leon in Blade Runner.