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Subject:  When will Fed knee-jerk reaction come? Date:  1/16/2018  2:03 PM
Author:  notehound Number:  529641 of 605970

The Federal Open Market Committee (FOMC) controls monetary policy for the US.

The FOMC is surely aware that the Cleveland Fed just issued Consumer Price Index (CPI) inflation figures that translate into a 3.5% annual rate of inflation. This amount is almost double the Fed's desired 2.0% inflation rate.

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.5% annualized rate) in December. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.8% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.1% (1.8% annualized rate) in December. The CPI less food and energy rose 0.3% (3.4% annualized rate) on a seasonally adjusted basis...

The following factors suggest that the Fed is behind the curve on tightening monetary policy - representing inflationary forces that may induce the Fed to "slam on the brakes" to slow down an out-of-control economy:

1. Better than full employment.

2. Significant increases in the minimum wage across the country (via local governments as well as via Walmart pay increases).

3. Tax cuts to corporations and to individuals.

4. Massive amounts of idle cash burning a hole in the proverbial pocket of investors as well as workers receiving raises.

5. Fear of missing out (FOMO), which leads to emotional investing decisions.

6. A general mood of "windfall price increases" led by news stories describing the incredible gains in Bitcoin and other cryptocurrencies.

I wonder how long it will take the current FOMC to respond aggressively to slow down the runaway train.

The Dow just advanced by 1,000 points, from 25,000 to 26,000, in just seven (7) trading days.

Dow bursts through 26,000 in record seven trading days
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