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Hartnett Says "Fed Tolerating Higher Inflation" Target
Housekeeping: Good Morning
“Crypto and Gold are at all-time highs because the market is sniffing out a Fed that's going to tolerate higher inflation, which will give them, of course, weaker policy credibility.”
Summary:
For The Fed to witness recent harsh inflation upticks and offer little to no pushback against it or for that matter the market’s persistent expectations of rate cuts means implies a tolerance for a higher inflation level is here.
* It implies the target has been raised if not completely discarded.
* It also means the Fed is worried more about recession than inflation now.
The market sees this and is betting Powell has thrown in the towel on his 2% inflation target.
Hartnett’s Flow Show analysis goes through the signs this is in fact happpening
Hartnett’s Key Insights:
Fed may be more worried about Recession than Inflation for three reasons:
* because weaker Jobs implies recessionary slowdown
* and because the STIRS market continues to think Fed will ease in June despite bond yields creeping higher, exploding Gold and BTC prices
* Fed also not doing much talking down rate cut hopes yet
Therefore: market sniffing out Fed tolerating higher inflation targets. His forward-looking indicators are now starting to point to Stagflation as the risk as a result.
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