Gold continues to trade under pressure, dropping to $1,700 an ounce.
US Federal Reserve Chairman Jerome Powell's keynote speech last week had a sustained impact that continues to push US equities and precious metals lower. His speech was strong and clear, confirming that the Fed is determined to bring down inflation at all costs.
According to the Evening Briefing by Bloomberg, Powell has given up on the possibility of a soft landing and is now aiming for something that could potentially cause much more suffering for US corporations and individuals. However, many analysts are convinced that the Fed's hawkish monetary policy will not be enough to achieve its intended goal.
Further, the article states that analysts have called this economic scenario the paradoxical name of "growth recession." It differs from a soft landing in that it is defined as a protracted period of meager growth and rising unemployment.
The belief that Chairman Powell is trying to reduce inflation with a "growth recession" to avoid an outright recession is similar to cutting out a picture to fit the frame. The simple truth is that a recession is most likely inevitable, and the question is how deep it will be and how much pain it will cause corporations and Americans in 2023.
Achieving an inflation target of 2% when the latest data relative to PCE is above 6% is a pipe dream without an increase in interest rates or a gradual increase in rates with the understanding that this will be a multi-year process of fighting inflation.
A historical perspective on how various Federal Reserve Chairmans have faced the challenge of bringing inflation to a manageable target shows that this has never been accomplished without raising interest rates to meet the inflation target.