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FameEX Hot Topics | Critics Slam Powell's Fed Policy, Accuse of Creating a 'False Economy' and Undermining Credibility After Rate Decision

2023-12-14 16:25:15

The Federal Reserve's recent Federal Open Market Committee (FOMC) meeting concluded with interest rates unchanged, aligning with market expectations of rate reductions in 2024. Fed Chair Jerome Powell's dovish stance had a positive impact, leading to gains in U.S. stocks, the crypto market, and precious metals like gold and silver. Following the FOMC announcement, major U.S. stock indices surged, reflecting the market's optimism. The crypto sector experienced a significant 3.66% increase, with bitcoin (BTC) rising by 4%. Safe-haven assets such as gold and silver also saw gains of 2.41% and 4.48%, respectively, signaling widespread confidence in the Fed's decision.

Powell addressed the current economic situation, acknowledging that while the economy is not currently in a recession, there is a potential for one in the coming year. He emphasized the need for careful monetary policy, indicating that the Fed is focused on avoiding the mistake of keeping rates too high for too long. Powell also recognized progress in core inflation and non-housing services inflation, suggesting a cautious and adaptable approach to future monetary policy adjustments.

Contrary to speculations, further rate hikes seem unlikely, as Powell hinted that the current policy rate is likely at or near its peak for this tightening cycle. This aligns with expectations that the Fed may halt rate hikes and consider cuts in 2024. The FOMC's statement and Powell's remarks underscored the Fed's commitment to returning inflation to its 2% target, with evolving methods.

Economist Peter Schiff critiqued Powell's stance, suggesting that Powell hasn't truly won the inflation battle, and the phony economy and bull market continue to thrive due to persistent inflation. Sven Henrich of Northman Trader noted that Powell's shift towards easing financial conditions has damaged the Fed's credibility, as the central bank now claims a restrictive policy while financial conditions have eased to loose levels.

Despite Powell's remarks, the CME Fedwatch tool predicts a rate increase at the next FOMC meeting in January, with an 89.7% probability, while 10.3% expect no change. The decision to maintain the federal funds rate was influenced by concerns about persistent inflation and the broader economic environment.

Powell's dovish approach and hints at potential rate reductions in 2024 have left markets uncertain about the future direction of monetary policy, with investors closely monitoring upcoming FOMC meetings for further clues.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.

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