Fed chief Jerome Powell’s incompetence was on full display at yesterday’s Federal Open Market Committee (FOMC) meeting.
As I expected, the Federal Reserve left interest rates unchanged. That means the federal funds rate remains at 5.5%, following July’s “vanity” rate hike.
Now, some talking heads out there are calling this a “skip” rather than a pause. It’s what the Fed did at its June meeting.
They believe the Fed is still in “tightening” mode, meaning it’s got many more rate hikes in its arsenal. They’ll tell you this is just a break along the way.
But those semantics just don’t matter.
If you’re a longtime reader, you’ve heard me say this before: The Fed is in a rough spot. It wants to control inflation – but it can’t.
It wants to be able to claim “victory” when inflation figures recede.
But it also wants to keep the door open with the “more work to be done” excuse when inflation figures rise. That way it can keep flipping a coin on what it wants to do with interest rates each meeting, with no repercussions or accountability.
If you’re Powell, that’s a great way to play both sides. But here’s what infuriates me the most…
The talking heads on mainstream media still portray the Fed as knowing what it’s doing.
Even worse, they’ll try to convince you that the Fed can do what it says it wants to. But it’s all a lie.
The Fed Can’t Lower Your Gas Price
I’m sure you’ve noticed gas prices at the pump creeping up. In Los Angeles, where I live, the average gas price hit $6 for the first time this year.
Nationwide, gas prices are sitting at 2023 highs.
During this same period, the Fed has raised rates by a total of 100 basis points. And it claims it’s done so to fight inflation and help Main Street America.
But in reality, the Fed has zero – and I mean zero – control over oil prices. And that’s really what determines how much you pay at the gas pump.
Yes, to an extent, oil demand is based on economic activity. And higher costs because of higher borrowing rates can curtail some activity.
But oil prices are also largely based on geopolitics and demand.
Oil prices are sitting at a near 10-month high – the highest levels of 2023 so far. You can see this in the chart below…
That’s due to two main factors, none of which have anything to do with the Fed.
First, Russia and Saudi Arabia curtailed their production. They’re the first- and second-biggest oil exporters. So when they curtail production, it causes supply disruptions, which puts upward pressure on prices.
Second, OPEC just projected growing global demand for oil through the rest of 2023 and 2024. Meanwhile, OPEC is also reducing oil supply. Those two factors combined will put upward pressure on oil prices as well.
Third, the U.S. Energy Information Administration (EIA) has forecast oil consumption to rise through 2024.
These are the things that really move the needle on how much you pay at the pump. Not the Fed.
The Fed Can’t Lower Your Car or Home Costs
Meanwhile, Americans’ incomes have declined for three years in a row. And they are more in debt than ever.
The total U.S. credit card debt is at a record high of over $1 trillion.
This means people are borrowing more rather than using cash to make purchases. And when people are forced to take on more debt to make purchases, their true buying power shrinks.
Plus, U.S. car loan debt is also at a record high of over $1.5 trillion. That means people are carrying more debt for their cars at higher levels.
Next time you pay your car loan, remember to thank the Fed. You’re paying more because the Fed has been raising rates at the fastest pace in 40 years.
And though one of the Fed’s mandates is to ensure price stability… house affordability in the United States is at a 40-year low.
This is due to the combination of high prices relative to people’s incomes and high mortgage rates making the cost of a mortgage prohibitive.
And, since rates have risen over time, people are paying more in interest charges for that debt.
So the Fed’s position of fighting inflation for the good of the economy, even if that good comes with pain, isn’t working out that well.
Overall inflation figures might be lower than they were this time last year. Inflation did fall from an annual rate of 9.1% last June to 3.7%.
But that doesn’t mean prices aren’t still rising. They are just rising more slowly.
That means rising prices are still pinching Americans’ pockets – your pockets.
The Fed Is Powerless
That’s not a mark of the Fed having control over anything.
In fact, I give it a “D” in helping the economy, stabilizing prices, and controlling inflation.
It’s been all over the place with its policy this year. It raised rates in May, paused in June, raised again in July, and paused again in September.
If that pattern holds, we will likely see another 25-basis point hike in November.
But it’s like deciding monetary policy by a coin flip.
That’s why it’s so important for you to protect your own money – and your family’s financial future – from whatever the Fed does next.
Because even though the Fed doesn’t know what it’s doing, it just overstepped its boundaries in a truly unprecedented other way.
This summer, the Fed launched the biggest overhaul to our money – YOUR money – in 50 years.
JPMorgan Chase, Wells Fargo, and even the U.S. Treasury are already involved, along with 54 other early adopters. And, as I detail in this investigative report, that’s only the beginning…
The good news is, there are steps you can take to protect your hard-earned money from this power grab – and even multiply it.
History shows that folks who position themselves right now – before this overhaul is a done deal – could make as much as 10 times… 20 times… even 50 times their money. Even as most Americans are blindsided.
To get my playbook for preserving and growing your wealth ahead of this historic shift, watch my full report right here.
Regards,
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Nomi Prins
Editor, Inside Wall Street with Nomi Prins