Thursday, July 6, 2023

♟ Beating the Fed at Chicken

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Tug of War Representing Bull Markets and Bear Markets

"These rate hikes could be really bad news for the economy later this year or next."

Karim Rahemtulla, Head Fundamental Tactician, Monument Traders Alliance

Karim Rahemtulla

The Fed is saying that it's willing to push interest rates higher, which would mean risking a recession or worse.

Inflation is one of the main reasons we could see more rate hikes.

According to the minutes from the Federal Open Market Committee meeting on June 13-14, the participants concurred that while inflation had moderated since the middle of 2022, it remained well above the committee's long-term goal of 2%.

As you know by now, the committee decided not to raise rates at the June meeting. But some participants did favor a 25-basis-point increase, noting that the labor market remained very tight and that the economy was stronger than expected.

It's clear the Fed is playing chicken with the economy, trying to slow it down but also trying to avoid a recession.

So what should you do as a trader in this game?

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