Imaging Inflation

"Magic mirror on the wall, who is the fairest one of all?"
--The Queen (Snow White and the Seven Dwarfs)

Futures up big this am after markets digested the FOMC's dovish statement yesterday. In his post-session press conference, Fed chair Jerome Powell emphasized the we-need-more-inflation' rationalization. He stated that the Fed doesn't want to be "seen as weak on inflation."

The reasoned economic mind would take that statement to mean that the central bank would be vigilant about creating too much inflation. Powell means precisely the opposite, of course. It wants to be seen as powering inflation higher.

A question followed from the crowd. Why not set the Fed's inflation target even higher--from its current arbitrary level of 2% price increases annually to, say, double that...4%? Powell replied that, given the Fed's inability to hit its 2% target, "I wonder how credible that would be."

Think about it. The Fed chair doesn't seem bothered by the idea of a 4% inflation target (despite the economic havoc that 4% annual price increases would wreak). Instead, he is more concerned about the Fed's institutional image.

History will surely look back on this moment and shake its head.

Gold, btw, may finally be catching on. After moving up about $10 yesterday afternoon, the yellow metal is up about $22 overnight. Now at $1382, gold is chewing thru latent supply in an important zone of technical resistance.

position in gold