Even though Fed Chair Powell was quick to disabuse the Congressional kangaroo court today that the current bout of runaway inflation is anything but permanent, at least three FOMC members disagree, as Curvature’s repo guru Scott Skyrm observes today.
Writing in his daily repo market commentary, Skyrm notes that two Fed governors saw the fed funds peak at 3.00% and one at 2.75% in the “dot plot” of the FOMC statement in the next tightening cycle.
Conceding that he may be reading the “tea leaves” too much, Skyrm the notes that “that’s 50 basis points above the peak of 2.25% to 2.50% during the last cycle.” And while everyone knows that the “dot plot” is historically inaccurate and it’s a better indication of what the Fed governors are thinking at the time, Skyrm said that a peak fed funds rate at 3.00% does not corresponds with the current surge in inflation as being “temporary”… or corresponds with keeping rates are zero right now.
The repo experts concludes that “if some Fed governors believe there will be more tightening than that last cycle, it either means they expect more inflation in the near future or there’s too much stimulus in the economy right now.”
Translation: a mutiny is building within Powell’s “Transitory Inflation” Fed, and while just three uber-hawks have emerged so far, there is plenty of time until 2023 for Powell to experience a real insurrection, not the straight-to-CNN January 6 special produced by the FBI in and around the Capitol building.