Fed extremely cautious

The Fed Is Going to Trigger a Recession Within Six Months

Gains Pains & Capital

April 5, 2022
The Fed Is Going to Trigger a Recession Within Six Months
By Graham Summers, MBAThe bond market is telling us that the Fed is in very serious trouble.Bonds are quite complicated, so I’m going to do my best to keep things very simple here.The Fed ended its Quantitative Easing (QE) program through which it prints new money and used it to buy assets from Wall Street in early March. Since that time, the Fed has also begun raising interest rates, implementing its first rate hike of 0.25% on March 17th.Historically, when the Fed begins raising interest rates, it looks to the 2-Year U.S. Treasury for guidance: the Fed tracks the yield on this bond as a proxy for where rates need to go.With that in mind, the yield on the 2-year Treasury, is exploding higher. In six months, it has moved approximately the same amount that it did from 2012-2018!!! This is a truly incredible move, and it tells us the Fed is WAYYYY behind the curve in terms of where interest rates need to go.
If you think that’s disturbing, consider the following…This yield on the 2-year U.S. Treasury is HIGHER now than it was before the Fed raised rates a few weeks ago. This means the Fed is MORE behind the curve now than it was before it actually raised rates!
We know from the inflationary storm of the late 1970s/ early 1980s that once the Fed gets really behind the curve on inflation, small moves no longer work. The Fed will NEED to be EXTREMELY aggressive going forward to stop inflation.

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