The Fed’s goal is to reduce inflation to 2% while keeping the labor market strong, Powell said on Wednesday, but “I think what is becoming clearer is that many factors we do not control will play a very important role in deciding “Whether this is possible or not,” he said. Commodity prices, the war in Ukraine and the chaos of the supply chain will continue to affect inflation, he said, and no change in monetary policy will mitigate these things.
There is still a way to reduce inflation to 2%, he said, but that path is increasingly being overshadowed by these external forces. Powell’s speech was largely at odds with messages from the White House, which has stressed that the Fed is the definitive fighter for inflation in the United States. Earlier this month, when economic data showed that inflation was still at a 40-year high and that the consumer climate had fallen to an all-time low, the Biden administration highlighted the role of the US Federal Reserve in controlling prices. “The Fed has the tools it needs and we give it the space it needs to function,” said Brian Deese, director of the National Economic Council. Last week, however, Powell pushed for another narrative. These ever-increasing prices of gas and food, he said, are not under his control. “Proper monetary policy alone can no longer bring us back to 2% inflation with a strong labor market,” he said. “So much of it does not really depend on monetary policy,” Powell said Wednesday. “The aftermath of the war in Ukraine has led to an increase in the prices of energy, food, fertilizers, industrial chemicals and also just supply chains more broadly, which were longer – or longer than expected.” Mark Zandi, chief economist at Moody’s Analytics, agrees. “The primary culprit [of inflation] “These were the highest energy prices, especially for gasoline, and many of them can be traced back to the Russian invasion of Ukraine that sparked global oil prices,” he said in a recent episode of his Moody’s Talks podcast. Inflation should be reduced as the pandemic subsides and the market adjusts to new sanctions against Russia, he added. It is difficult to say whether raising interest rates will help curb the spread of inflation from fires or whether it is too much too late. Powell seems to be compensating. “I think the events of the last few months have increased the degree of difficulty, they have created great challenges,” Powell said. “And there is a much greater chance now that it depends on factors we do not control.”

The $ 5.7 billion bet against Europe

Some wealthy Americans enjoy vacationing in Europe. The richest man in Connecticut prefers to bet billions of dollars against the financial future of the old world. Ray Dalio Bridgewater Associates is betting nearly $ 6 billion that European stocks will fall. This makes the largest hedge fund in the world the largest open equity seller in the world in euro shares. In total, Bridgewater has 18 active short bets against European companies, including a $ 1 billion position against ASML Holding semiconductor and a $ 752 million bet against oil and energy company TotalEnergies SE. This is not Bridgewater’s first rodeo. Dalio has not been on Europe’s side for a long time. In 2020, Bridgewater bet $ 14 billion on shares there and in 2018 created a $ 22 billion short position against the region. Purkua? Bridgewater was quite a mom to her whole strategy for the euro in general, but some clues emerged from an interview Dalio gave to the Italian newspaper La Repubblica last week. He explained that Bridgewater lives far away from countries at risk of civil strife or international war. He also said he was concerned about central banks’ efforts to tackle high inflation and expected the economy to deteriorate soon because of them.
In short, it succeeds because of the war in Ukraine and the hawkish policy of the European Central Banks. But maybe this is the battle for world order. One thing Dalio is not ashamed of is sharing his broader worldview. In a series of blog posts on LinkedIn, he explained why he believes the United States is moving fast toward civil war and how the world order is changing. “The Russia-Ukraine-US-other countries dynamic is the most interesting part of the changing dynamics of the ongoing world order,” he writes. “But it is essentially just the first battle in what will be a long war for world order.” Perhaps Bridgewater, which has $ 151 billion in assets, is betting that Europe will not be able to pull out of the war. So far, this bet pays off. The company posted gains of 26.2% in top Pure Alpha capital this year, while the S&P 500 lost almost 24%. The STOXX Europe 600, a broad index that measures the European stock market, is falling about 17% year on year.

Next

Monday: June 10 holiday, markets closed in the US. Tuesday: Existing house discounts for May. Wednesday: Federal Reserve Chairman Jerome Powell is due to testify on the economic outlook in Washington DC. Thursday: Initial unemployment claims. Crude oil reserves of the Energy Information Administration (EIA). Friday: Discounts for new homes for May.