09.11.202111:15 Forex Analysis & Reviews: Fed does not want and cannot notice real problems in the US economy

The Fed continues to persistently show its view on the growth rate and the time range of US inflation, while the heads of federal banks do not yet consider the current level of inflation to be critical.

During the press conference after the Fed meeting last week, J. Powell made it clear to the markets that the regulator does not plan to start raising interest rates in the near future, which has already put pressure on the yields of treasuries and the dollar exchange rate. But the important thing in this regard is that his opinion is fully supported by the members of the Central Bank, so we really should not expect discrepancies between the head of the Federal Reserve and the members of the Open Market Committee (FOMC), who collectively decide on rates.

The opinion of the speakers, Charles Evans, J. Bullard, and R. Clarida, is also important. They expressed the general premise that high inflation is a temporary phenomenon and it is not high enough to take radical measures and against this background, the Fed is "far" from considering raising interest rates.

The question arises: why does the American regulator ignore the 5.4% inflation that is high for the United States in the time range of 13 years?

In fact, real or consumer inflation is much higher. We believe that this is due to the obsessive desire of the ruling class in America to do two things at the same time – to leave attractive investments in the country's economy, while stock indexes continue to rise unreasonably, and not to stimulate sales in the government bond market, the fall of which leads to an increase in yields, and hence to high payments on government debts to borrowers.

At the same time, we pay attention to the fact that the national debt already amounts to more than two annual budgets of the country. The Fed is trying to solve two opposite problems in terms of consequences, avoiding large-scale social problems within the country and defaulting on the external circuit.

Based on this policy, which is likely to dominate the Central Bank for some time, the current trends in the markets is expected to continue, in which the US dollar will balance near the 94.00 point mark on the ICE index. Meanwhile, stock indexes will continue to update new highs, and prices for crude oil and precious metals will consolidate near the current levels. All this can only stop either the collapse of the stock market and the consequences of 1929 or the inevitability of the decision to start raising interest rates.

Forecast of the day:

The USD/JPY pair broke through the range of 113.20-114.40, where it has been consolidating since mid-October. A price decline below the level of 113.20 and consolidation below it may lead to a further decline to the level of 112.00.

The price of spot gold has suspended its growth and is below the level of 1830.00 and may make a downward correction to the level of 1810.00 before rising again to 1854.00.