The latest Consumer Price Index (CPI) released by the U.S. reached a
13-year high at 5.4%, indicative of the severe inflation in the country.
However, Powell noted that tightening monetary policies was not urgent
because of the transient inflation in the hearing of the House of
Representatives, thus indicating that taking actions to suppress
inflation too early would be a mistake. In addition, he implied that it
was not time to scale back the bond purchase. According to a range of
analyses, most analysts dont share the same view that inflation is
temporary. Some hold the same opinion as I do that Powell is not
credible because his view is no longer grounded in reality.To get more
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IC Markets, you can visit wikifx.com official website.
Traders have insufficient faith to go short USD even though DXY has
fallen back to some extent due to the dovish messages of Powell. They
are afraid of him turning to send hawkish messages as the Federal
Reserve (Fed) is fully equipped to delist, according to the statistics
of the American economy and inflation. Therefore, traders won‘t go short
based on his word of transient inflation. When Canada and New Zealand
have announced delisting with their economic and inflation statistics
far lower than those of the U.S., why Powell still ignores the reality
nationwide and Yellen’s hint about interest-rate hikes twice？ What is
his plan？
The situation may be related to the upcoming expiration of Powell‘s
tenure. He may take renewal into account, whereas his performance plays
an important role in the decision-making of Biden. Perhaps Powell fears
that tighter monetary policies at the moment can lead the American stock
to a steep slump and adversely impact the economic performance, thus
continuing to claim that inflation is temporary and bluster dovish
messages out. In this way, he can obtain reappointment as the bull
market and economic development are maintained. The plummet of the
American stock will risk Powell’s career if Biden is contemplating his
renewal of the Fed chair.
According to his counselor, the president hasn‘t decided whether
Powell is reappointed, reported by Reuters. The final result will be
apparent if Biden only takes the performance of the financial market
into account. However, he has been fully aware that the well-performed
American stock market is mainly ascribed to the confidence in his
upcoming policies instead of Powell’s ability. Hence, Biden may have
reservations about Powell‘s competence. If all aforementioned opinions
are correct, Powell won’t take real responses to the economic situation
and inflation until he knows whether he can continue in office. It is
worth noticing that members of the Federal Open Market Committee (FOMC)
may discuss the time of delisting in the meeting of the Fed at the end
of July because of exacerbating inflation. Consequently, this should be
paid attention to by investors, especially those who intend to go short
USD.
