Investors’ expectations are that the Federal Reserve will remain ultra-accommodative even after the + 5% marked by US inflation in May. The market gives credit to the Fed’s view that the surge in consumer prices is transitory, but there are those who are sounding the alarm about a possible big misjudgment that the US central bank is making.
Today to launch the alert is Paul Tudor Jones. The billionaire hedge fund manager believes the economic orthodoxy has been overturned with the Federal Reserve focused on unemployment even as inflation and financial stability should fuel concerns. “The risk of inflation is not transitory – Tudor Jones remarks in an interview with CNBC – and if the Fed says the US economy is on the right track, then I would put everything on the right track.inflation trade buying commodities, cryptocurrencies and gold. Jones added that if he were on a pension fund’s investment committee, he would give as much coverage as possible to inflation risk.
Powell towards the most important meeting of his career
The next Fed meeting is on the agenda on 15 and 16 June and according to Tudor Jones it will be “the most important meeting in Jerome Powell’s career, certainly the most important Fed meeting of the last four or five years”.
The reason the meeting is so important is because the latest data question both the Fed’s mission and their model according to Tudor Jones. “So how they react to that is going to be extraordinarily important.”
Potentially explosive mix of monetary and fiscal policy
Fed officials, however, continue to insist that current readings are transitory and are unlikely to persist. The Fed currently has a $ 120 billion-a-month asset purchase program at near-zero interest rates, initiated with Covid to create liquidity during the pandemic.
According to Paul Tudor Jones, the Fed may already be claiming victory over its mandate, instead it is implementing quantitative easing and stimulating an economy “which is already hot”.
To the Fed stimulus is added the more than $ 5 trillion of congressional stimulus. “We have the craziest mix of fiscal and monetary policy since the Federal Reserve Board was created,” asserts Jones.