The most highly antipated FOMC Meeting of 2022 took place on Wednesday with the Fed announcing a “super-sized” rate hike.
Declaring that it’s essential to tame inflation, the Federal Reserve raised interest rates by 75 basis points – the biggest increase since 1994 with Fed Chairman Jerome Powell signalled another jumbo sized hike next month.
Over the last 12 months, inflation has spread to every corner of the economy with primary Cost of Living Expenses from Food, Fuel, Rent, Clothing and Energy prices – rising at double-digit annual rates for the first time since the early 1980s. U.S CPI data released on Friday, once again showed a further surge in those unavoidable areas of spending with Consumer Price Inflation rising at its fastest pace in 41-years.
Soaring prices are hurting consumers and the cure is enviably going to hurt even more. As policy makers very well know, the only sure fire cure to stamp out inflation is a recession.
Panicked by the sky-high inflation its actions helped fuel – the Fed is now stepping too hard on the monetary policy brakes in much the same way it kept its foot on the accelerator for too long last year.
With inflation running out of control, the only plausible option left now is for the Federal Reserve to continue raising rates aggressively until policymakers break inflation, but this may also come at the risk of breaking the economy.
Following on from this week’s rate hike, odds of a recession soared to 85% – with a long list of leading Wall Street banks predicted “significant risk” of a recession by mid-2023 – amid fears of a policy error by the Federal Reserve.
One reason, why Wall Street is convinced that the Fed’s shift to a more hawkish policy stance could bring on a recession is that it has already caused the asset bubbles it created last year to burst. Since the start of the year, Global Equity prices have fallen over 30%. Forex markets have plummeted to multi-year lows. While Cryptocurrencies have crashed the hardest with Bitcoin down over 70%, whilst other tokens have lost over 95% of their value.
All risky assets are now officially in a bear market. Meanwhile on the flipside, Commodities across the board from the metals, energies to agriculture markets are now officially in a bull market – and only 18 months into potentially a decade long Supercycle, according to Goldman Sachs.
As everything from Equities, Cryptocurrencies to the FX markets continue to meltdown – Commodities have proven to be the most stable asset class. This is incentivizing savvy traders to diversify their holdings into Commodities to maximize on the dual benefits of safety and high returns on offer in this new economic climate, we now find ourselves in.
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:
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