by Michael Pento, Market Oracle:
Citigroup’s Economic Surprise Index just hit its lowest level since August 2011. But this level of disappointment has ironically emboldened the Fed to step up its hawkish monetary rhetoric. The truth is that the hard economic data is grossly missing analyst estimates to the downside as the economy inexorably grinds towards recession. This anemic growth and inflation data should have been sufficient to stay the Fed’s hand for the rest of this year and cause it to forgo the unwinding of its balance sheet.
But that’s not what’s happening. Ms. Yellen and Co. are threatening at least one more rate hike and to start selling what will end up to be around $2 trillion worth of MBS and Treasuries before the end of the year–starting at $10 billion each month and slowly growing to a maximum of $60 billion per month.
But why is the Fed suddenly in such a rush to normalize interest rates and its balance sheet? Perhaps it is because Ms. Yellen wants to fire Trump before she hears his favorite mantra, “you’re fired,” when her term expires in early 2018. It isn’t a coincidence that these Keynesian liberals at the Fed started to ignore the weak data concurrently with the election of the new President.