It is not a question if but how much and when do we see inflation this year. As tonight we did not get very good news from the fed. They told us that they expect a rise in inflation later this year. This news from te Federal Reserve by its chairman Powell, triggered a sudden sell-off in stock and long-term US Treasury debt.
Powell said the central bank expects to be “patient” in withdrawing support for the recovery, given that the labour market remained far from the central bank’s goal of full employment and had made little progress in recent months.
With such a negative tone Powell failed to comfort stocktraders. The Fed chairman suggested that although central bank officials were closely watching the market movements, it would take much more to push them.
“As it relates to the bond market, I’d be concerned by disorderly conditions in markets or by a persistent tightening in financial conditions broadly that threatens the achievement of our goals,” Powell said.
US stocks also sold off sharply as Powell spoke, with the S&P 500 down 2 per cent in afternoon trading. And the Nasdaq dropped almost 3 per cent, turning negative for the year. So that means we are going to go down in Europe to tomorrow.
Will this be the begining of a new chapter where we see rising interest rates and rising inflation. It is bound to happen some day with all the money that was created the last few years. We believe so.