They Know Nothing


Thursday the Fed raised the Fed Funds Rate 75 basis points to 3.0-3.25% as expected. What surprised me – and the market – was the continued hawkishness implied by the “dot plot” – the Fed’s expectation of where interest rates will need to go in the months and years ahead. As you can see in the tweet by Brian Chappatta the members of the Fed Board believe that the Fed Funds rate will need to rise another 100 or 125 basis points by the end of the year!

As I’ve written previously the tightening the Fed has already done is still working its way through the system; as the cliche says “monetary policy acts with a lag”. Commodity prices have rolled over. The August CPI came in hotter than expected – but that’s just one statistic. For the Fed to continue to plow ahead – pedal to the medal – without letting up at all to see the effects of what they have already done is completely tone deaf. They are now apparently hellbent on massively tightening into a recession. To quote Jim Cramer from the greatest rant in financial television history: “They know nothing!!!”

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