Analysts from ANZ Bank say that new data released this week by The Institute for Supply Management (ISM) could prove to be troublesome for the economy, despite showing steady growth in manufacturing.
The Bank analysts say that the growth gives the Federal Reserve food for thought, noting, “The U.S. data this week has suggested the Fed still has a lot of work to do to reduce demand sufficiently to bring inflation down.”
While growth is usually good news, it comes at a time when the central bank is actively trying to dampen economic growth to bring down inflation. The Federal Reserve may go even harder at inflation, with more supersized rate hikes now likely. It has already increased basis points by 225 since March, as per Reuters, but rate increases have done little to stifle rising inflation.
The expectation is that measures targeting inflation could become more severe and tilt the economy into a recession, which the Federal Reserve is now beginning to acknowledge.
Speaking to a chamber of commerce gathering in Ohio on Wednesday, Cleveland Federal Reserve Bank President Loretta Mester was clear that the Feds work is nowhere near complete. “My current view is that it will be necessary to move the fed funds rate up to somewhat above 4 percent by early next year and hold it there; I do not anticipate the Fed cutting the fed funds rate target next year,” she said. “This will be painful in the near term, but so is high inflation.”
Credit rating agency Moody’s has already downgraded its global growth forecast as a result. It has revised its forecast for the top 20 economies worldwide from 3.1% to 2.5%.
Expect to see the gold bulls take command as harsher measures are ushered in, and the economic pain begins to bite. The precious metal thrives in economic downturn thanks to its safe haven status. With Mester confirming that rates will be even higher for a sustained period next year, now is the optimal moment to add gold to your portfolio. Buy now.
