The Fed Makes One Thing Perfectly Clear: They’re More Confused Than Ever
by Jim Rickards | 22 Aug 2022

The Fed Makes One Thing Perfectly Clear: They’re More Confused Than Ever 

Investors and analysts hang on every word the Federal Reserve says. They treat the Fed as the most powerful player in global markets and like an omnipotent force that can stop inflation, stimulate growth, cure unemployment, target interest rates, and basically make or break (or is that brake?) the U.S. economy. There’s only one problem with that perspective.

The Fed Is Not Omnipotent

The Fed members can’t do any of those things and have no idea what they’re talking about. They do put on a good show and maintain an aura of mystery. Financial journalists play along either because they don’t know any better or just because, well, they have to write about something. Everyday investors devour the financial news and play along with the pixie dust narrative of Fed omnipotence like a man overboard desperate for a life preserver.

The truth is the Fed is more confused and impotent than most investors. This article (Ref 1) is a good example of why that’s true. The article describes the market’s reaction to the release on August 17, 2022 of the minutes of the Fed’s meeting on July 27. Pay no attention to the market reaction itself. Markets go up or down daily for reasons no one completely understands. (Focus on market trends; they’re much more powerful than day-to-day blips). Instead, look at what the Fed is saying according to the minutes.

What The Fed Is Saying

Some officials said they want to raise interest rates by “at least” 0.50% in September. That means 0.75% is still on the table.

Other officials said, “it likely would become appropriate at some point to slow the pace of policy rate increases.” That means 0.50% if the “pace” is 0.75% or 0.25% if the “pace” is 0.50% at the next meeting. Got it?

Other officials said that once policy reached a “sufficiently restrictive level”, they would like to “maintain that level for some time.”

Jay Powell said the July 0.75% rate increase was “unusually large” but would not take another 0.75% rate hike off the table. He also said that rates could rise “by another percentage point through December.” Since there are three meetings left this year, that implies rate hikes of 0.50%, 0.25% and 0.25% at the next three meetings.

The Fed Has No Idea What It’s Doing

So, there you have it according to the Fed minutes. Rate hikes could be 0.75%, 0.50%, 0.25%, or simply maintained at an undefined “restrictive level.” Let me interpret that word salad for you: The Fed has no idea what it’s doing and markets might as well toss a coin in the air when it comes to forecasting.

Anyway, it doesn’t really matter. What matters is not the Fed, but real economic growth, productivity, inflation, supply chain dysfunction, inventories and a growing global liquidity crisis. The Fed doesn’t know how to fix any of those problems. But they are good at making things worse.

Jim Rickards

About the Author

Jim Rickards is an American lawyer, economist, investment banker, speaker, media commentator, and author on matters of finance and precious metals. He is the author of Currency Wars: The Making of the Next Global Crisis and six other books.

This article is taken from his “Strategic Intelligence” newsletter. You can learn more about Jim and his newsletters at

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