The Central Bank Failures
The growing helplessness and hopelessness of central banks grows as recession fears escalate.
The WSJ reported today inflation in Canada is soaring again.
And don’t leave out the UK or Germany.
“Demonstrating the recession fears gripping the market, U.K. gilt yields dropped by nearly a quarter-point after inflation data showing the fastest growth in prices since 1982. Earlier, the U.K. Office for National Statistics reported that CPI rose to 9.1% in the 12 months to May. The yield on the 2-year gilt TMBMKGB-02Y, 2.123% dropped 23 basis points to 2.09%. The yield on the 2-year German bund TMBMKDE-02Y, 1.053% slipped nearly 10 basis points to 1.05%.” MarketWatch.
Meanwhile, Powell at the Humphrey-Hawkins confab intimated a recession is possible.
This is more word salad for it’s here. In a Bloomberg interview:
“Former president of the Federal Reserve Bank of New York, and vice-chair of The Fed Bill Dudley has not been shy to express his real thoughts since he left the hallowed halls of groupthink.
“In August 2019, he urged Fed Chair Powell to prevent Trump's re-election.
In June 2020, Dudley admitted The Fed's massive intervention during the COVID crash had created "a little bit of moral hazard in the sense you’re encouraging people to take on more debt."
In October 2020, the former FRBNY boss admitted The Fed was powerless and only Congress could save Americans now.
In November 2021, Dudley warned The Fed that "hope and pray" that inflation abates is not a strategy, warning, "if it waits, the economy could significantly overheat, requiring the Fed to jam on the brakes, precipitating an early recession."
Then lastly, in April 2022, the retired groupthinker admitted that "Financial conditions need to tighten. If this doesn’t happen on its own (which seems unlikely), the Fed will have to shock markets to achieve the desired response."
“Which appears to be what they have done, and now, confirming what we have been saying since December, Dudley explains in his latest Bloomberg Op-Ed that The Fed is cornered and a hard landing for the economy is inevitable.” Inevitable or Not?
The Canadian situation worsens.
“Annual inflation in Canada accelerated in May toward 8%, reaching a nearly four-decade high and all but locking in market expectations that the country's central bank will raise its policy interest rate by three quarters of a percentage point in July. Economists expect inflation in Canada to surpass 8% when June data are released, and possibly stay above 7% for the bulk of 2022.
“The need for aggressive Bank of Canada rate increases to tame inflation has prompted analysts to predict a sharp slowdown in economic growth starting in the second half of this year, and to warn of heightened risks of a recession.
'The Bank of Canada needs to get a handle on prices soon,' said Royce Mendes, economist at Desjardins Securities.Canada's consumer-price index in May increased 7.7% from a year ago, Statistics Canada said Wednesday, after a 6.8% gain in the previous month.
The May report eclipsed market expectations for a 7.3% rise, according to economists at the Bank of Nova Scotia. A 48% surge in gasoline prices helped drive inflation to its highest level since January 1983, while the cost of groceries and shelter remained elevated. Nearly three quarters of the goods and services tracked by Canada's CPI rose 3% or higher in May.
The Bank of Canada's mandate is to set rate policy to achieve and maintain inflation between a 1% to 3% target range, with a focus on the midpoint, 2%.four-decade high in inflation. Earlier Wednesday, the U.K. reported a four-decade high in inflation for May, as that country's CPI increased 9.1%.Even excluding prices for energy and food, which have escalated since the war in Ukraine, annual inflation in Canada remains in the 5% range.
For instance, the average of the Bank of Canada's preferred measures for underlying core inflation in May rose to a record 4.73%, up from a revised 4.43% in the previous month. Core inflation provides a measure of price changes that strips out volatile goods such as food and energy.
'This is well beyond a one-off move that will quickly fade even if oil prices relent,' said Doug Porter, chief economist at BMO Capital Markets. 'The key takeaway is that the Bank of Canada still has lots of work to do, with a 0.75-point hike in July almost fully baked in, and we suspect another full percentage-point of tightening to follow that through the remainder of the year.”
Recall over the weekend after his falling-off-the-bike incident a reporter asked Biden if a recession was inevitable. Biden turned somewhat surly, another of his staples whenever anyone questions him, answering the question.
And just yesterday after receiving a letter from the CEO of Chevron he criticized him for being so “sensitive.” This is the same guy at the start of the Ukraine mess lectured the American public he didn’t want to hear any talk about a nuclear fallout.
What we are citing here are facts, not fiction. This is an administration laden with supreme incompetence.