Fed's Pause Is A Dangerous Gamble With World's Largest Economy
The Federal Reserve's decision to hold interest rates days before the midterms is a dangerous gamble with inflation, warns the CEO ofdeVere Group, one of the world's largest independent financial advisory organisations.
The comments from Nigel Green come as the Fed holds rates at 3.75% to 4%, with inflation at 3.7% and voters heading to the polls on November 3.
AdvertisementIn 2021 the Fed insisted inflation was transitory and kept rates at rock bottom. By the time it finally moved in March 2022, prices were already rising at close to 8%.
Three months later inflation hit 9.1%, a 40-year high. What followed was brutal: four straight hikes of 0.75 percentage points, and rates above 5% by mid-2023.
The warning signs are flashing again. The Fed has missed its 2% target for more than five years.
Consumer prices jumped 0.6% in September alone. Core PCE, the Fed's favoured measure, is heading towards 3.1%. Americans' fears about prices over the coming year are at their highest since May 2023.
There's no jobs crisis to hide behind either. Unemployment has held steady at around 4.2% for a year.
Bond markets are losing patience. The 10-year Treasury yield is hovering near 5% after hitting its highest level since 2002 this month, while the average 30-year mortgage rate is close to 7.4%.
The timing could hardly be worse, with the White House again trying to oust Fed Governor Lisa Cook despite an earlier Supreme Court setback.
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