Though not a new word to describe Fed policy intentions, using it in today’s statement in the context of obviously rising inflation and inflationary expectations is a new policy stance and one very favorable for gold and likely the Trump administration as well. It seems that the Fed is willing to chase the inflation rate rather than trump it (forgive the reference), and as long as that’s the case, the markets will read inflation into the economic script for the future.
I think some were expecting “accommodative” to disappear from the Fed-speak particularly after Yellen’s speech earlier this month when she said the central bank is likely to pursue “a neutral” rates policy. “A ‘neutral’ policy stance,” said Yellen pre-meeting, ” is one where monetary policy neither has its foot on the brake nor is pressing down on the accelerator.” Post-meeting the word “accomodative” was still there – like a bright and shiny gold coin sitting on the sidewalk waiting to be pocketed. It was. Gold ran higher and so did stocks. Even bonds firmed though God knows why. . . . . . .
All of this blends nicely into themes raised in our March newsletter:
Will banks’ excess reserves fuel a new monetary crisis?
Don’t look now but inflation and a new gold rush might be in our future.
In that issue a case is made, as the title suggests, that we may be at the beginning of something. Today, the Ides of March may have delivered something of a confirmation.
A couple charts from that chart-rich issue to whet your appetite. . . . . . . . . .
