Trump's new appointee at the Fed made his case publicly yesterday for a much lower neutral rate and Fed Funds rate.
If he had his way, he'd take policy there quickly.
And it would do nothing to alter any tax effect of tariffs on end consumer prices.
That said, the current restrictive policy that has been vigorously defended by the Fed over the past eight months is also doing nothing to alter any tax effect of tariffs on end consumer prices.
It's only slowing the economy, most clearly harming the housing market, and now the job market.
Both only make the cost burden for the consumer higher. Meanwhile the Fed claims to be positioning policy to curb costs.
It doesn't add up.
The Fed Chair was on a stage today with an opportunity to counter Miran's quantitative case for why the policy rate should be in the mid 2s. It would be nice to hear a point-by-point rebuttal of Miran's speech yesterday, given it is so disconnected from where the rest of the Fed is.
It didn't happen.
He had five minutes of prepared remarks, and 35 minutes of Q&A — not one mention of Miran, his divergent views on the policy decision last week, nor the case for the (low) neutral rate he made yesterday.
He reiterated much of the same stuff we've heard over the past month.
Let's revisit the gold/silver ratio …
As we've discussed in past notes, when this ratio is around these extreme levels, it has historically been associated with extreme moments of safe-haven demand.
And in the past cases, the gold safe-haven demand leads … pushing the ratio to extremes.
Silver later follows (higher) on both industrial demand (in war time) and relative value (as a safe haven asset).
And in these prior peaks, it's the outsized rise in silver that pushes the ratio back down.
The metals complex is broadly leading global asset class performance for the year. It's wartime behavior (platinum up 58% ytd, silver up 44% ytd, gold up 36% ytd, palladium up 34% ytd).
With that, as the UN leaders are meeting in New York, the escalation rhetoric is heating up on Russia/Ukraine.