Dan Celia, CEO & President of FISM

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Jerome Powell, Chair of the U.S. Federal Reserve, warned last week that the new COVID variant, Omicron, could exacerbate the supply-chain disruptions and possibly lead U.S. inflation to its highest level in 30 years. Our Federal Reserve would like to hide behind another propagated crisis; however, the actual roots of our rising inflation are the central banks and failed government policy.

Poor leadership in our government and in the central banks is the only consistent inflation agitator and the primary obstacle for inflation recovery. Central banks have historically failed to see how their own inabilities, lack of foresight, and fear of the markets always hinder them from distinguishing between transitory inflation and real sustainable inflation. The Federal Reserve operates from a delusional or arrogant belief that they can control inflation at will. This has been their besetting sin for years. 

Powell could have easily raised interest rates beginning in March, strengthened the dollar, and instilled some confidence in the global economy. After all, leadership requires the ability to get ahead of the curve – to LEAD rather than be led. Apparently, however, that was not the politically right thing to do.  The Biden Administration took our Federal Chair, a man that had previously led with confidence and conviction, and turned him into a political puppet, forbidden to show any kind of independent thought or honesty.

Loretta Mester, President of the Cleveland Fed, told the Financial Times on Thursday that the new variant could also worsen worker shortages, which continues to stymie a labor market recovery.  U.S. jobs growth slowed significantly last month, with just 210,000 positions created. This was less than half of October’s pace and well short of economists’ expectations. Despite their “concerns” surrounding Omicron, the Fed appears poised to speed up withdrawal of its stimulus programs during its policy meeting this month as it assumes a more aggressive stance against inflation and gives them flexibility to raise interest rates sooner next year. Why does our Federal Reserve need flexibility to do the only thing they could do to help right now? The one right and helpful action on their part right now would be to raise interest rates. It is actually that simple. To speed up withdrawal of its stimulus programs will only serve as a pathetic excuse for not doing the right thing. 

Jerome Powell is pivoting. Our inflation crisis has nothing to do with Omicron. The Federal Reserve is politicized and untrustworthy. Do not be misled, the Fed will never stop buying our debt, even if they stop telling us they are. They can’t. No one else is buying at the level we need. If they were to stop buying our debt, it would be akin to telling the Treasury that they will no longer peddle the bike we are all riding. When you stop pedaling the Bike of Spending, you fall over. At the speed we are traveling, it would be a very hard fall.