“[T]he Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.” – July FOMC Policy Statement
The FOMC voted unanimously in favor of the Policy Statement and related actions released last week. While the Fed indicated that “ongoing increases” will be data dependent, the key data points consistent with the alleged Fed mandate are CPI inflation and the unemployment rate. Both are phony numbers but if the Fed thinks it can attack inflation by attacking consumer demand, it will need to continue hiking rates for now and it can point to a sub-4% unemployment rate, as fictitious as that number may be, to justify continued rate hikes.
That said, the precious metals sector at this point will not care whether or not the Fed pivots. Real interest rates are still extremely negative – meaning monetary policy continues to devalue the dollar – and there are many indications that the precious metals sector may be forming a tradeable bottom.
Chris Marcus of Arcadia Economics and I discuss the implications of the Fed’s latest episode of “FOMC Kabuki Theatre” and why the current policy as well as possible pivot is bullish for gold, silver and mining stocks: