Financial markets have plunged into chaos in the face of the highest inflation rate in 41 years.
The root of this inflation-induced crisis stems from the Fed's misjudgment of the market situation.
On the 31st of last month (local time), Secretary Yellen shocked the White House. In a CNN interview, she admitted, "We misjudged the path of inflation." Until then, the Biden administration had focused on consistently describing the surge in consumer prices as 'transitory'.
With this statement, Yellen deviated from the Biden administration's inner circle.
Yellen's misjudgment, the economic head of the Biden administration and someone confident about inflation
Jerome Powell's misjudgment, who stated that there would be no interest rate hikes until 2024 and that the Fed was not even considering inflation.
It's clear that even the Fed didn't anticipate inflation becoming this strong.
In fact, inflation had been managed just by signaling interest rate hikes.
However, the situation took a sharp turn in just six months. With inflation hitting a 41-year high, market expectations of no rate hikes this year have been replaced by the expectation of a 3.5% US benchmark interest rate by the end of the year.
Given the current situation caused by the Fed's misjudgment, what should we do?
As much as we don't want to believe it, we need to pay attention to what the Fed says again.
Because they have the power to print the dollar, the benchmark for the price of all goods worldwide.!
In March 2020, during the depths of the COVID-19 pandemic,
the Fed introduced a strategy never before imagined, unlimited quantitative easing.
In the week following this announcement on March 24, 2020, the S&P 500 index bottomed out and began an unprecedented ascent, like a rocket launched into the sky. This led to a surge in the number of foreign stock investors, many of whom were retail investors.
The Fed has changed its stance.
With a firm belief that asset prices will rise, they have rolled up their sleeves to tackle inflation.
The Fed is extremely determined to curb inflation.
As a cold snap in the asset market is about to begin,
it seems we need to accelerate efforts to secure cash flow and prepare for the upcoming cold wave.
Winter is Coming
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